[10-Q] Yum China Holdings, Inc. Quarterly Earnings Report
Yum China reported continued growth in the second quarter of 2025, with consolidated revenues of $2,787 million, up from $2,679 million a year earlier, driven by higher Company sales of $2,613 million. Operating profit rose to $304 million from $266 million, and net income attributable to Yum China was $215 million for the quarter (diluted EPS $0.58), compared with $212 million a year ago. Year-to-date results show revenues of $5,768 million and net income of $507 million.
The company generated strong operating cash flow of $864 million year to date, ended the period with $592 million of cash and $1,563 million of short-term investments, and repurchased 7.7 million shares for $356 million year to date under a $4.4 billion authorization with ~$936 million remaining. Scale remains large: 12,238 KFC and 3,864 Pizza Hut restaurants in China, totaling 16,978 restaurants. Key risks disclosed include an ongoing Chinese transfer pricing audit that could be material, and an unrealized investment loss on Meituan impacted results.
Yum China ha registrato una crescita anche nel secondo trimestre 2025, con ricavi consolidati pari a $2,787 milioni, in aumento rispetto ai $2,679 milioni dell'anno precedente, trainati da vendite della Società per $2,613 milioni. Il risultato operativo è salito a $304 milioni da $266 milioni, e l'utile netto attribuibile a Yum China è stato di $215 milioni nel trimestre (EPS diluito $0,58), rispetto a $212 milioni un anno fa. I risultati da inizio anno mostrano ricavi per $5,768 milioni e un utile netto di $507 milioni.
La società ha generato un solido flusso di cassa operativo di $864 milioni da inizio anno, ha chiuso il periodo con $592 milioni di liquidità e $1,563 milioni in investimenti a breve termine, e ha riacquistato 7,7 milioni di azioni per $356 milioni da inizio anno nell'ambito di un'autorizzazione di $4,4 miliardi, con circa $936 milioni ancora disponibili. La dimensione resta significativa: 12.238 ristoranti KFC e 3.864 Pizza Hut in Cina, per un totale di 16.978 punti vendita. I principali rischi segnalati includono un audit sui prezzi di trasferimento in Cina in corso che potrebbe risultare rilevante e una perdita non realizzata su un investimento in Meituan che ha inciso sui risultati.
Yum China informó un crecimiento continuado en el segundo trimestre de 2025, con ingresos consolidados de $2,787 millones, frente a $2,679 millones un año antes, impulsados por unas ventas de la Compañía de $2,613 millones. El beneficio operativo aumentó a $304 millones desde $266 millones, y el beneficio neto atribuible a Yum China fue de $215 millones en el trimestre (BPA diluido $0.58), comparado con $212 millones un año atrás. Los resultados acumulados muestran ingresos de $5,768 millones y un beneficio neto de $507 millones.
La compañía generó un fuerte flujo de caja operativo de $864 millones en lo que va de año, cerró el periodo con $592 millones en efectivo y $1,563 millones en inversiones a corto plazo, y recompró 7,7 millones de acciones por $356 millones hasta la fecha bajo una autorización de $4,4 mil millones, con aproximadamente $936 millones pendientes. La escala sigue siendo grande: 12.238 restaurantes KFC y 3.864 Pizza Hut en China, un total de 16.978 restaurantes. Los principales riesgos divulgados incluyen una auditoría de precios de transferencia en China en curso que podría ser material y una pérdida no realizada en una inversión en Meituan que afectó los resultados.
Yum China는 2025년 2분기에도 성장을 이어가며 연결 매출 $2,787백만을 기록해 전년 동기 $2,679백만에서 증가했습니다. 이는 회사 매출 $2,613백만의 증가에 따른 것입니다. 영업이익은 $266백만에서 $304백만으로 상승했고, Yum China 귀속 당기순이익은 이번 분기 $215백만(희석 주당순이익 $0.58)이었으며 전년 동기에는 $212백만이었습니다. 연초 이후 누적 실적은 매출 $5,768백만, 당기순이익 $507백만을 보였습니다.
회사는 연초 이후 강한 영업현금흐름 $864백만을 창출했으며, 기간 말 현금 $592백만과 단기투자 $1,563백만을 보유했습니다. 또한 연초 이후 $356백만을 투입해 770만주(7.7백만주)를 자사주로 재매입했으며, $4.4십억(4.4 billion) 승인 한도 중 약 $936백만이 남아 있습니다. 규모는 여전히 큽니다: 중국 내 KFC 12,238개, Pizza Hut 3,864개로 총 16,978개 매장입니다. 공시된 주요 리스크로는 중요할 수 있는 중국 내 이전가격(transfer pricing) 관련 조사 진행과 Meituan 투자에서 발생한 미실현 손실이 실적에 영향을 미친 점이 포함됩니다.
Yum China a poursuivi sa croissance au deuxième trimestre 2025, avec un chiffre d'affaires consolidé de 2 787 millions de dollars, en hausse par rapport à 2 679 millions un an plus tôt, porté par des ventes de la Société de 2 613 millions. Le résultat d'exploitation a augmenté à 304 millions contre 266 millions, et le résultat net attribuable à Yum China s'est élevé à 215 millions de dollars pour le trimestre (BPA dilué de 0,58 $), contre 212 millions un an auparavant. Les résultats cumulés depuis le début de l'année montrent un chiffre d'affaires de 5 768 millions de dollars et un résultat net de 507 millions.
La société a généré un solide flux de trésorerie d'exploitation de 864 millions de dollars depuis le début de l'année, a clôturé la période avec 592 millions en liquidités et 1 563 millions en placements à court terme, et a racheté 7,7 millions d'actions pour 356 millions depuis le début de l'année dans le cadre d'une autorisation de 4,4 milliards, avec environ 936 millions restants. L'envergure reste importante : 12 238 restaurants KFC et 3 864 Pizza Hut en Chine, soit 16 978 restaurants au total. Parmi les principaux risques signalés figurent un audit en cours sur les prix de transfert en Chine susceptible d'être significatif et une perte latente sur un investissement dans Meituan ayant affecté les résultats.
Yum China verzeichnete auch im zweiten Quartal 2025 weiteres Wachstum: die konsolidierten Umsatzerlöse beliefen sich auf $2.787 Millionen gegenüber $2.679 Millionen im Vorjahr, getragen von höheren Konzernverkäufen in Höhe von $2.613 Millionen. Das operative Ergebnis stieg auf $304 Millionen von $266 Millionen, und der auf Yum China entfallende Nettogewinn betrug im Quartal $215 Millionen (verwässertes Ergebnis je Aktie $0,58) gegenüber $212 Millionen vor einem Jahr. Die Ergebnisse seit Jahresbeginn zeigen Umsatzerlöse von $5.768 Millionen und einen Nettogewinn von $507 Millionen.
Das Unternehmen generierte einen starken operativen Cashflow von $864 Millionen seit Jahresbeginn, schloss den Zeitraum mit $592 Millionen liquiden Mitteln und $1.563 Millionen kurzfristigen Anlagen ab und hat im bisherigen Jahr 7,7 Millionen Aktien für $356 Millionen zurückgekauft. Unter der Genehmigung von $4,4 Milliarden verbleiben dabei rund $936 Millionen. Die Größe bleibt beträchtlich: 12.238 KFC- und 3.864 Pizza Hut-Filialen in China, insgesamt 16.978 Restaurants. Zu den genannten Hauptrisiken zählen eine laufende Prüfung der Verrechnungspreise in China, die materiell sein könnte, sowie ein nicht realisierter Verlust aus einer Investition in Meituan, der die Ergebnisse belastet hat.
- Consolidated revenue growth to $2,787M in Q2 2025 from $2,679M a year ago, driven by higher Company sales
- Operating profit increased to $304M in the quarter, up from $266M, indicating improved operating leverage
- Strong operating cash flow of $864M year to date, supporting capital returns and investments
- Active capital return program: 7.7M shares repurchased for $356M YTD under a $4.4B authorization with ~$936M remaining
- Large scale and market position: 12,238 KFC and 3,864 Pizza Hut restaurants in China (16,978 total)
- Ongoing transfer pricing audit in China with outcomes that management says could be material to results, cash flows and financial condition
- Investment volatility: unrealized loss on Meituan contributed to an investment loss (quarter: $(18)M; unrealized (loss) on Meituan $(17)M for the quarter)
- Higher effective tax rate: 25.8% for the quarter and 26.9% year to date, increased by planned repatriation and fair value changes
- Lower cash balance: cash and cash equivalents decreased to $592M from $723M at the prior balance date (net decrease $131M year to date)
Insights
TL;DR: Solid quarter with modest revenue and operating-profit growth; strong operating cash flow supports buybacks and dividend while taxes and investment volatility temper near-term upside.
Yum China delivered sequentially stronger operating performance with consolidated revenue growth and a meaningful increase in operating profit (from $266M to $304M). Year-to-date operating cash flow of $864M underpins capital allocation: $356M of share repurchases YTD and a declared cash dividend of $0.24 per share (total est. $88M). Liquidity remains sizable with $1.563B in short-term investments, though cash declined to $592M. Investors should note investment volatility (unrealized loss on Meituan) and slightly higher effective tax rates that reduced net margins. Overall impact: mixed-positive for capital return and cash generation; neutral for margin expansion.
TL;DR: Operational strength is clear, but the ongoing China transfer pricing audit poses a credible material risk that could affect future results and cash flows.
The filing discloses a national transfer pricing audit by Chinese authorities focused on related-party franchise arrangements with Yum! Brands and states that significant developments are reasonably possible within 12 months. Management warns that an adverse outcome could be material to results, cash flows and financial condition. This contingent tax exposure, together with sensitivity to fair value swings in equity investments (notably Meituan), elevates downside risk compared with peers. From a risk perspective, the audit uncertainty is a substantive negative that investors should track closely.
Yum China ha registrato una crescita anche nel secondo trimestre 2025, con ricavi consolidati pari a $2,787 milioni, in aumento rispetto ai $2,679 milioni dell'anno precedente, trainati da vendite della Società per $2,613 milioni. Il risultato operativo è salito a $304 milioni da $266 milioni, e l'utile netto attribuibile a Yum China è stato di $215 milioni nel trimestre (EPS diluito $0,58), rispetto a $212 milioni un anno fa. I risultati da inizio anno mostrano ricavi per $5,768 milioni e un utile netto di $507 milioni.
La società ha generato un solido flusso di cassa operativo di $864 milioni da inizio anno, ha chiuso il periodo con $592 milioni di liquidità e $1,563 milioni in investimenti a breve termine, e ha riacquistato 7,7 milioni di azioni per $356 milioni da inizio anno nell'ambito di un'autorizzazione di $4,4 miliardi, con circa $936 milioni ancora disponibili. La dimensione resta significativa: 12.238 ristoranti KFC e 3.864 Pizza Hut in Cina, per un totale di 16.978 punti vendita. I principali rischi segnalati includono un audit sui prezzi di trasferimento in Cina in corso che potrebbe risultare rilevante e una perdita non realizzata su un investimento in Meituan che ha inciso sui risultati.
Yum China informó un crecimiento continuado en el segundo trimestre de 2025, con ingresos consolidados de $2,787 millones, frente a $2,679 millones un año antes, impulsados por unas ventas de la Compañía de $2,613 millones. El beneficio operativo aumentó a $304 millones desde $266 millones, y el beneficio neto atribuible a Yum China fue de $215 millones en el trimestre (BPA diluido $0.58), comparado con $212 millones un año atrás. Los resultados acumulados muestran ingresos de $5,768 millones y un beneficio neto de $507 millones.
La compañía generó un fuerte flujo de caja operativo de $864 millones en lo que va de año, cerró el periodo con $592 millones en efectivo y $1,563 millones en inversiones a corto plazo, y recompró 7,7 millones de acciones por $356 millones hasta la fecha bajo una autorización de $4,4 mil millones, con aproximadamente $936 millones pendientes. La escala sigue siendo grande: 12.238 restaurantes KFC y 3.864 Pizza Hut en China, un total de 16.978 restaurantes. Los principales riesgos divulgados incluyen una auditoría de precios de transferencia en China en curso que podría ser material y una pérdida no realizada en una inversión en Meituan que afectó los resultados.
Yum China는 2025년 2분기에도 성장을 이어가며 연결 매출 $2,787백만을 기록해 전년 동기 $2,679백만에서 증가했습니다. 이는 회사 매출 $2,613백만의 증가에 따른 것입니다. 영업이익은 $266백만에서 $304백만으로 상승했고, Yum China 귀속 당기순이익은 이번 분기 $215백만(희석 주당순이익 $0.58)이었으며 전년 동기에는 $212백만이었습니다. 연초 이후 누적 실적은 매출 $5,768백만, 당기순이익 $507백만을 보였습니다.
회사는 연초 이후 강한 영업현금흐름 $864백만을 창출했으며, 기간 말 현금 $592백만과 단기투자 $1,563백만을 보유했습니다. 또한 연초 이후 $356백만을 투입해 770만주(7.7백만주)를 자사주로 재매입했으며, $4.4십억(4.4 billion) 승인 한도 중 약 $936백만이 남아 있습니다. 규모는 여전히 큽니다: 중국 내 KFC 12,238개, Pizza Hut 3,864개로 총 16,978개 매장입니다. 공시된 주요 리스크로는 중요할 수 있는 중국 내 이전가격(transfer pricing) 관련 조사 진행과 Meituan 투자에서 발생한 미실현 손실이 실적에 영향을 미친 점이 포함됩니다.
Yum China a poursuivi sa croissance au deuxième trimestre 2025, avec un chiffre d'affaires consolidé de 2 787 millions de dollars, en hausse par rapport à 2 679 millions un an plus tôt, porté par des ventes de la Société de 2 613 millions. Le résultat d'exploitation a augmenté à 304 millions contre 266 millions, et le résultat net attribuable à Yum China s'est élevé à 215 millions de dollars pour le trimestre (BPA dilué de 0,58 $), contre 212 millions un an auparavant. Les résultats cumulés depuis le début de l'année montrent un chiffre d'affaires de 5 768 millions de dollars et un résultat net de 507 millions.
La société a généré un solide flux de trésorerie d'exploitation de 864 millions de dollars depuis le début de l'année, a clôturé la période avec 592 millions en liquidités et 1 563 millions en placements à court terme, et a racheté 7,7 millions d'actions pour 356 millions depuis le début de l'année dans le cadre d'une autorisation de 4,4 milliards, avec environ 936 millions restants. L'envergure reste importante : 12 238 restaurants KFC et 3 864 Pizza Hut en Chine, soit 16 978 restaurants au total. Parmi les principaux risques signalés figurent un audit en cours sur les prix de transfert en Chine susceptible d'être significatif et une perte latente sur un investissement dans Meituan ayant affecté les résultats.
Yum China verzeichnete auch im zweiten Quartal 2025 weiteres Wachstum: die konsolidierten Umsatzerlöse beliefen sich auf $2.787 Millionen gegenüber $2.679 Millionen im Vorjahr, getragen von höheren Konzernverkäufen in Höhe von $2.613 Millionen. Das operative Ergebnis stieg auf $304 Millionen von $266 Millionen, und der auf Yum China entfallende Nettogewinn betrug im Quartal $215 Millionen (verwässertes Ergebnis je Aktie $0,58) gegenüber $212 Millionen vor einem Jahr. Die Ergebnisse seit Jahresbeginn zeigen Umsatzerlöse von $5.768 Millionen und einen Nettogewinn von $507 Millionen.
Das Unternehmen generierte einen starken operativen Cashflow von $864 Millionen seit Jahresbeginn, schloss den Zeitraum mit $592 Millionen liquiden Mitteln und $1.563 Millionen kurzfristigen Anlagen ab und hat im bisherigen Jahr 7,7 Millionen Aktien für $356 Millionen zurückgekauft. Unter der Genehmigung von $4,4 Milliarden verbleiben dabei rund $936 Millionen. Die Größe bleibt beträchtlich: 12.238 KFC- und 3.864 Pizza Hut-Filialen in China, insgesamt 16.978 Restaurants. Zu den genannten Hauptrisiken zählen eine laufende Prüfung der Verrechnungspreise in China, die materiell sein könnte, sowie ein nicht realisierter Verlust aus einer Investition in Meituan, der die Ergebnisse belastet hat.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares outstanding of the registrant’s common stock as of August 4, 2025 was
Yum China Holdings, Inc.
INDEX
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Part I. |
Financial Information |
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Item 1 – Financial Statements |
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Condensed Consolidated Statements of Income – Quarters and Years to Date Ended June 30, 2025 and 2024 (Unaudited) |
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Condensed Consolidated Statements of Comprehensive Income – Quarters and Years to Date Ended June 30, 2025 and 2024 (Unaudited) |
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Condensed Consolidated Statements of Cash Flows – Years to Date Ended June 30, 2025 and 2024 (Unaudited) |
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Condensed Consolidated Balance Sheets – June 30, 2025 (Unaudited) and December 31, 2024 |
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Condensed Consolidated Statements of Equity – Quarters and Years to Date Ended June 30, 2025 and 2024 (Unaudited) |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3 – Quantitative and Qualitative Disclosures About Market Risk |
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Item 4 – Controls and Procedures |
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Part II. |
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Item 1 – Legal Proceedings |
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Item 1A – Risk Factors |
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Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 5 – Other Information |
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Item 6 – Exhibits |
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Signatures |
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income (Unaudited)
Yum China Holdings, Inc.
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Company restaurants |
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Food and paper |
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Income Before Income Taxes and Equity in |
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|
|
|
|
|
|
|
|
|
||||
Income tax provision |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Equity in net earnings (losses) from equity method investments |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Net income – including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income – noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income – Yum China Holdings, Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted-average common shares outstanding (in millions): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic Earnings Per Common Share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted Earnings Per Common Share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See accompanying Notes to Condensed Consolidated Financial Statements.
3
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
Yum China Holdings, Inc.
(in US$ millions)
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||||
Net income – including noncontrolling interests |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other comprehensive income (loss), net of tax of nil: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Comprehensive income – including noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Comprehensive income – noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Comprehensive Income – Yum China Holdings, Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See accompanying Notes to Condensed Consolidated Financial Statements.
4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Yum China Holdings, Inc.
(in US$ millions)
|
|
Year to Date Ended |
||||||||
|
|
6/30/2025 |
|
6/30/2024 |
||||||
Cash Flows – Operating Activities |
|
|
|
|
|
|
|
|
||
Net income – including noncontrolling interests |
|
$ |
|
|
|
$ |
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
|
|
||
Non-cash operating lease cost |
|
|
|
|
|
|
|
|
||
Closures and impairment expenses |
|
|
|
|
|
|
|
|
||
Investment loss (gain) |
|
|
|
|
|
|
( |
) |
|
|
Equity in net (earnings) losses from equity method investments |
|
|
( |
) |
|
|
|
— |
|
|
Distributions of income received from equity method investments |
|
|
|
|
|
|
|
|
||
Deferred income taxes |
|
|
( |
) |
|
|
|
( |
) |
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
||
Changes in accounts receivable |
|
|
( |
) |
|
|
|
( |
) |
|
Changes in inventories |
|
|
|
|
|
|
|
|
||
Changes in prepaid expenses, other current assets and value-added tax assets |
|
|
( |
) |
|
|
|
( |
) |
|
Changes in accounts payable and other current liabilities |
|
|
( |
) |
|
|
|
|
|
|
Changes in income taxes payable |
|
|
|
|
|
|
|
|
||
Changes in non-current operating lease liabilities |
|
|
( |
) |
|
|
|
( |
) |
|
Other, net |
|
|
|
|
|
|
( |
) |
|
|
Net Cash Provided by Operating Activities |
|
|
|
|
|
|
|
|
||
Cash Flows – Investing Activities |
|
|
|
|
|
|
|
|
||
Capital spending |
|
|
( |
) |
|
|
|
( |
) |
|
Purchases of short-term investments, long-term bank deposits and notes |
|
|
( |
) |
|
|
|
( |
) |
|
Maturities of short-term investments, long-term bank deposits and notes |
|
|
|
|
|
|
|
|
||
Acquisition of equity investment |
|
|
( |
) |
|
|
|
— |
|
|
Other, net |
|
|
|
|
|
|
|
|
||
Net Cash Used in Investing Activities |
|
|
( |
) |
|
|
|
( |
) |
|
Cash Flows – Financing Activities |
|
|
|
|
|
|
|
|
||
Proceeds from short-term borrowings |
|
|
— |
|
|
|
|
|
|
|
Repayment of short-term borrowings |
|
|
( |
) |
|
|
|
( |
) |
|
Repurchase of shares of common stock |
|
|
( |
) |
|
|
|
( |
) |
|
Cash dividends paid on common stock |
|
|
( |
) |
|
|
|
( |
) |
|
Dividends paid to noncontrolling interests |
|
|
( |
) |
|
|
|
( |
) |
|
Other, net |
|
|
( |
) |
|
|
|
( |
) |
|
Net Cash Used in Financing Activities |
|
|
( |
) |
|
|
|
( |
) |
|
Effect of Exchange Rates on Cash, Cash Equivalents and Restricted Cash |
|
|
|
|
|
|
( |
) |
|
|
Net Decrease in Cash, Cash Equivalents and Restricted Cash |
|
|
( |
) |
|
|
|
( |
) |
|
Cash, Cash Equivalents, and Restricted Cash - Beginning of Period |
|
|
|
|
|
|
|
|
||
Cash, Cash Equivalents, and Restricted Cash - End of Period |
|
$ |
|
|
|
$ |
|
|
||
Supplemental Cash Flow Data |
|
|
|
|
|
|
|
||
Cash paid for income tax |
|
|
|
|
|
|
|
||
Cash paid for interest |
|
|
— |
|
|
|
|
|
|
Non-cash Investing and Financing Activities |
|
|
|
|
|
|
|
||
Capital expenditures included in accounts payable and other current liabilities |
|
|
|
|
|
|
|
||
See accompanying Notes to Condensed Consolidated Financial Statements.
5
Condensed Consolidated Balance Sheets
Yum China Holdings, Inc.
(in US$ millions)
|
|
6/30/2025 |
|
|
12/31/2024 |
|
||
|
|
(Unaudited) |
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
||
Current Assets |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Short-term investments |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Inventories, net |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total Current Assets |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Long-term bank deposits and notes |
|
|
|
|
|
|
||
Equity investments |
|
|
|
|
|
|
||
Deferred income tax assets |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total Assets |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND EQUITY |
|
|
|
|
|
|
||
Current Liabilities |
|
|
|
|
|
|
||
Accounts payable and other current liabilities |
|
|
|
|
|
|
||
Short-term borrowings |
|
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
|
||
Total Current Liabilities |
|
|
|
|
|
|
||
Non-current operating lease liabilities |
|
|
|
|
|
|
||
Non-current finance lease liabilities |
|
|
|
|
|
|
||
Deferred income tax liabilities |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total Liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Redeemable Noncontrolling Interest |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Equity |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Treasury stock |
|
|
( |
) |
|
|
( |
) |
Additional paid-in capital |
|
|
|
|
|
|
||
Retained earnings |
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Total Yum China Holdings, Inc. Stockholders' Equity |
|
|
|
|
|
|
||
Noncontrolling interests |
|
|
|
|
|
|
||
Total Equity |
|
|
|
|
|
|
||
Total Liabilities, Redeemable Noncontrolling Interest and Equity |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
See accompanying Notes to Condensed Consolidated Financial Statements.
6
Condensed Consolidated Statements of Equity (Unaudited)
Yum China Holdings, Inc.
(in US$ millions)
|
|
Yum China Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Common |
|
|
Additional |
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable |
|
|||||||||||||
|
|
Stock |
|
|
Paid-in |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury Stock |
|
|
Noncontrolling |
|
|
Total |
|
|
Noncontrolling |
|
||||||||||||||||
|
|
Shares* |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Loss |
|
|
Shares |
|
|
Amount |
|
|
Interests |
|
|
Equity |
|
|
Interest |
|
||||||||||
Balance at March 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||||||
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||||||
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||||
Repurchase and retirement of shares |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
Exercise and vesting of share-based awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||||||||
Balance at June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at March 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||||||
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||||||
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||||
Distributions to/contributions from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||||
Repurchase and retirement of shares |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Exercise and vesting of share-based awards |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||||||||
Balance at June 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
7
|
|
Yum China Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Common |
|
|
Additional |
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable |
|
|||||||||||||
|
|
Stock |
|
|
Paid-in |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury Stock |
|
|
Noncontrolling |
|
|
Total |
|
|
Noncontrolling |
|
||||||||||||||||
|
|
Shares* |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Loss |
|
|
Shares |
|
|
Amount |
|
|
Interests |
|
|
Equity |
|
|
Interest |
|
||||||||||
Balance at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||||||
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||||||
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||||
Distributions to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||||
Repurchase and retirement of shares |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Exercise and vesting of share-based awards |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||||||||
Balance at June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance at December 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||||||
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||||||
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||||
Distributions to/contributions from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||||||
Repurchase and retirement of shares |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||
Exercise and vesting of share-based awards |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||||||||
Balance at June 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
*: Shares may not add due to rounding.
See accompanying Notes to Condensed Consolidated Financial Statements.
8
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Tabular amounts in US$ millions, except as otherwise noted)
Note 1 – Description of Business
Yum China Holdings, Inc. (“Yum China” and, together with its subsidiaries, the “Company,” “we,” “us,” and “our”) was incorporated in
The Company owns, franchises or has ownership in entities that own and operate restaurants (also referred to as “stores” or “units”) under the KFC, Pizza Hut, Lavazza, Huang Ji Huang, Little Sheep and Taco Bell concepts (collectively, the “concepts”). In connection with the separation of the Company in 2016 from its former parent company, Yum! Brands, Inc. (“YUM”), a master license agreement was entered into between Yum Restaurants Consulting (Shanghai) Company Limited (“YCCL”), a wholly-owned indirect subsidiary of the Company and YUM, through YRI China Franchising LLC, a subsidiary of YUM, effective from January 1, 2020 and previously through Yum! Restaurants Asia Pte. Ltd., another subsidiary of YUM, from October 31, 2016 to December 31, 2019, for the exclusive right to use and sublicense the use of intellectual property owned by YUM and its subsidiaries for the development and operation of the KFC, Pizza Hut and, subject to achieving certain agreed-upon milestones, Taco Bell brands and their related marks and other intellectual property rights for restaurant services in the People’s Republic of China (the “PRC” or “China”), excluding Hong Kong, Macau and Taiwan. The term of the license is
In 1987, KFC was the first major global restaurant brand to enter China. As of June 30, 2025, there were
The first Pizza Hut in China opened in 1990. As of June 30, 2025, there were
In the second quarter of 2020, the Company partnered with Luigi Lavazza S.p.A. (“Lavazza Group”), the world-renowned family-owned Italian coffee company, and established a joint venture (“Lavazza joint venture”), to explore and develop the Lavazza coffee concept in China. Lavazza joint venture operates both the coffee shop business and the retail business. We maintain a controlling interest of
In 2017, the Company acquired a controlling interest in the holding company of DAOJIA.com.cn (“Daojia”), an online food delivery service provider in China. This business was extended to also include a team managing the delivery services for restaurants, including restaurants in our system, with their results reported under our delivery operating segment.
The Company has
The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “YUMC.” On September 10, 2020, the Company completed a secondary listing of its common stock on the Main Board of the Hong Kong Stock Exchange (“HKEX”) under the stock code “9987,” in connection with a global offering of
Note 2 – Basis of Presentation
Our preparation of the accompanying Condensed Consolidated Financial Statements in conformity with Generally Accepted Accounting Principles in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
9
We have prepared the Condensed Consolidated Financial Statements in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The Condensed Consolidated Financial Statements include all normal and recurring adjustments considered necessary to present fairly our financial position as of June 30, 2025, and our results of operations, comprehensive income, statements of equity for the quarters and years to date ended June 30, 2025 and 2024, and cash flows for the years to date ended June 30, 2025 and 2024. Our results of operations, comprehensive income and cash flows for these interim periods are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as filed with the SEC on February 27, 2025.
Through the acquisition of Daojia, the Company also acquired a variable interest entity (“VIE”) and subsidiaries of the VIE effectively controlled by Daojia. There exists a parent-subsidiary relationship between Daojia and its VIE as a result of certain exclusive agreements that require Daojia to consolidate its VIE and subsidiaries of the VIE because Daojia is the primary beneficiary that possesses the power to direct the activities of the VIE that most significantly impact its economic performance, and is entitled to substantially all of the profits and has the obligation to absorb all of the expected losses of the VIE. The acquired VIE and its subsidiaries were considered immaterial, both individually and in the aggregate. The results of Daojia’s operations have been included in the Company’s Condensed Consolidated Financial Statements since the acquisition date.
Recently Adopted Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures (“ASU 2023-07”), requiring public business entities to provide disclosures of significant expenses and other segment items. The guidance also requires public entities to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for the Company for annual periods from January 1, 2024, and for interim periods from January 1, 2025, with early adoption permitted. We adopted this standard for annual disclosure in 2024 and for interim disclosure in 2025, and such adoption did not have a material impact on our financial statements. See Note 13 for further information.
Note 3 – Business Acquisitions and Equity Investments
Consolidation of Hangzhou KFC and Equity Investment in Hangzhou Catering
In the fourth quarter of 2021, the Company completed its investment in a
The purchase amount from Hangzhou Catering was immaterial for both quarters and years to date ended June 30, 2025 and 2024. The Company’s accounts payable and other current liabilities due to Hangzhou Catering were immaterial as of both June 30, 2025 and December 31, 2024.
Fujian Sunner Development Co., Ltd. (“Sunner”) Investment
In the first quarter of 2021, the Company acquired a
10
In May 2021, the Company obtained one seat on Sunner’s board of directors upon Sunner’s shareholder approval. The representation on the board, along with the Company being one of Sunner’s significant shareholders, provides the Company with the ability to exercise significant influence over the operating and financial policies of Sunner. As a result, the Company started to apply the equity method of accounting to the investment in May 2021 based on its then fair value. The Company elected to report its share of Sunner’s financial results with a one-quarter lag because Sunner’s results are not available in time for the Company to record them in the concurrent period. The Company’s equity earnings (losses) from Sunner, net of taxes, was $
The Company purchased inventories of $
As of June 30, 2025 and December 31, 2024, the carrying amount of the Company’s investment in Sunner was $
Meituan Dianping (“Meituan”) Investment
In the third quarter of 2018, the Company subscribed for
The Company accounts for the equity securities at fair value with subsequent fair value changes recorded in our Condensed Consolidated Statements of Income. The fair value of the investment in Meituan is determined based on the closing market price for the shares at the end of each reporting period. The fair value change, to the extent the closing market price of shares of Meituan as of the end of reporting period is higher than our cost, is subject to U.S. tax.
A summary of pre-tax gains or losses on investment in equity securities of Meituan recognized, which were included in Investment (loss) gain in our Condensed Consolidated Statements of Income, is as follows:
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||||
Unrealized (loss) gain recorded on equity securities still held |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Other Equity Investments
In addition, the Company has strategic equity investments in its eco-system partners, including food and information technology service suppliers. For investments over which the Company has significant influence but does not control, the Company applies equity method to account for such investments. These investments were immaterial both individually and in aggregate, totaling $
In the first quarter of 2025, the Company completed a strategic investment in SnowValley Agricultural Group, one of the Company’s key suppliers for potato and a private company, for total consideration of $
11
Note 4 – Revenue Recognition
The Company’s revenues include Company sales, Franchise fees and income, Revenues from transactions with franchisees, and Other revenues.
Company Sales
Revenues from Company-owned restaurants are recognized when a customer takes possession of the food and tenders payment, which is when our obligation to perform is satisfied. The Company presents sales net of sales-related taxes. We also offer our customers delivery through both our own mobile applications and third-party aggregators’ platforms. We use both our dedicated riders and platform riders to deliver orders. When orders are fulfilled by our dedicated riders or platform riders, we control and determine the price for the delivery service and generally recognize revenue, including delivery fees, when a customer takes possession of the food. When orders are fulfilled by the delivery staff of third-party aggregators, who control and determine the price for the delivery service, we recognize revenue, excluding delivery fees, when control of the food is transferred to the third-party aggregators’ delivery staff. The payment terms with respect to these sales are short-term in nature.
We recognize revenues from prepaid stored-value products, including gift cards and product vouchers, when they are redeemed by the customer. Prepaid gift cards sold at any given point generally expire over the next
Our privilege membership programs offer privilege members rights to multiple benefits, such as free delivery and discounts on certain products. For certain privilege membership programs offering a pre-defined amount of benefits that can be redeemed ratably over the membership period, revenue is ratably recognized over the period based on the elapse of time. With respect to privilege membership programs offering members a mix of distinct benefits, including a welcome gift and assorted discount coupons with pre-defined quantities, consideration collected is allocated to the benefits provided based on their relative standalone selling price and revenue is recognized when food or services are delivered or the benefits expire. In determining the relative standalone selling price of the benefits, the Company considers likelihood of future redemption based on historical redemption pattern and reviews such estimates periodically based upon the latest available information regarding redemption and expiration patterns.
Franchise Fees and Income
Franchise fees and income primarily include a combination of upfront franchise fees and continuing fees. We have determined that the services we provide in exchange for upfront franchise fees and continuing fees are highly interrelated with the franchise right. We recognize upfront franchise fees received from a franchisee as revenue over the term of the franchise agreement or the renewal agreement because the franchise rights are accounted for as rights to access our symbolic intellectual property. The franchise agreement term is generally
Revenues from Transactions with Franchisees
Revenues from transactions with franchisees consist primarily of sales of food and paper products, advertising services, delivery services and other services provided to franchisees.
The Company centrally purchases substantially all food and paper products from suppliers for substantially all of our restaurants, including franchisees, and then sells and delivers them to the restaurants. In addition, the Company owns seasoning facilities for its Chinese dining business unit, which primarily manufacture and sell seasoning products to Huang Ji Huang and Little Sheep franchisees. The Company also provides delivery services to franchisees. The performance obligation arising from such transactions is considered distinct from the franchise agreement as it is not highly dependent on the franchise agreement and the customer can benefit from such services on its own. We consider ourselves the principal in this arrangement as we have the ability to control a promised good or service before transferring that good or service to the franchisees. Revenue is recognized upon transfer of control over ordered items or services, generally upon delivery to the franchisees.
12
For advertising services, the Company often engages third parties to provide services and acts as a principal in the transaction based on our responsibilities of defining the nature of the services and administering and directing all marketing and advertising programs in accordance with the provisions of our franchise agreements. The Company collects advertising contributions, which are generally based on certain percentage of sales from substantially all of our restaurants, including franchisees. Other services provided to franchisees consist primarily of customer and technology support services. Advertising services and other services provided are highly interrelated to franchise right, and are not considered individually distinct. We recognize revenue when the related sales occur.
Other Revenues
Other revenues primarily include i) sales of products to customers through e-commerce channels, sales of Lavazza coffee retail products beyond Lavazza coffee shops, and sales of our seasoning products to distributors, and ii) revenues from logistics and warehousing services provided to third parties through our supply chain network. Our segment disclosures also include revenues relating to delivery services that were provided to our Company-owned restaurants and, therefore, were eliminated for consolidation purposes.
Other revenues are recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
Loyalty Programs
Each of the Company’s KFC and Pizza Hut reportable segments operates a loyalty program that allows registered members to earn points for each qualifying purchase. Points, which generally expire
Disaggregation of Revenue
The following tables present revenue disaggregated by types of arrangements and segments:
|
|
Quarter Ended 6/30/2025 |
|
|||||||||||||||||||||||||
Revenues |
|
KFC |
|
|
Pizza Hut |
|
|
All Other |
|
|
Corporate and Unallocated |
|
|
Combined |
|
|
Elimination |
|
|
Consolidated |
|
|||||||
Company sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Franchise fees and income |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Revenues from transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
|
|
Quarter Ended 6/30/2024 |
|
|||||||||||||||||||||||||
Revenues |
|
KFC |
|
|
Pizza Hut |
|
|
All Other |
|
|
Corporate and Unallocated |
|
|
Combined |
|
|
Elimination |
|
|
Consolidated |
|
|||||||
Company sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Franchise fees and income |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Revenues from transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
|
|
Year to Date Ended 6/30/2025 |
|
|||||||||||||||||||||||||
Revenues |
|
KFC |
|
|
Pizza Hut |
|
|
All Other |
|
|
Corporate and Unallocated |
|
|
Combined |
|
|
Elimination |
|
|
Consolidated |
|
|||||||
Company sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Franchise fees and income |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Revenues from transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
13
|
|
Year to Date Ended 6/30/2024 |
|
|||||||||||||||||||||||||
Revenues |
|
KFC |
|
|
Pizza Hut |
|
|
All Other |
|
|
Corporate and Unallocated |
|
|
Combined |
|
|
Elimination |
|
|
Consolidated |
|
|||||||
Company sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Franchise fees and income |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Revenues from transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||||
Accounts Receivable
Costs to Obtain Contracts
Costs to obtain contracts consist of license fees that are payable to YUM in relation to our deferred revenue of prepaid stored-value products, privilege membership programs and customer loyalty programs, as well as upfront franchise fees that we paid to YUM prior to the separation in relation to initial fees or renewal fees we received from franchisees. They meet the requirements to be capitalized as they are incremental costs of obtaining contracts with customers and the Company expects to generate future economic benefits from such costs incurred. Such costs to obtain contracts are included in Other assets in the Condensed Consolidated Balance Sheets and are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the assets relate. Subsequent to the separation, we are no longer required to pay YUM initial or renewal fees that we receive from franchisees. The Company did
Contract Liabilities
Contract liabilities at June 30, 2025 and December 31, 2024 were as follows:
Contract liabilities |
|
6/30/2025 |
|
|
12/31/2024 |
|
||
– Deferred revenue related to prepaid stored-value products |
|
$ |
|
|
$ |
|
||
– Deferred revenue related to upfront franchise fees |
|
|
|
|
|
|
||
– Deferred revenue related to customer loyalty programs |
|
|
|
|
|
|
||
– Deferred revenue related to privilege membership programs |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Contract liabilities primarily consist of deferred revenue related to prepaid stored-value products, privilege membership programs, customer loyalty programs and upfront franchise fees. Deferred revenue related to prepaid stored-value products, privilege membership programs and customer loyalty programs is included in Accounts payable and other current liabilities in the Condensed Consolidated Balance Sheets. Deferred revenue related to upfront franchise fees that we expect to recognize as revenue in the next 12 months is included in Accounts payable and other current liabilities, and the remaining balance is included in Other liabilities in the Condensed Consolidated Balance Sheets. Revenue recognized that was included in the contract liability balance at the beginning of each period amounted to $
14
The Company has elected, as a practical expedient, not to disclose the value of remaining performance obligations associated with sales-based royalty promised to franchisees in exchange for franchise right and other related services. The remaining duration of the performance obligation is the remaining contractual term of each franchise agreement. We recognize continuing franchisee fees and revenues from advertising services and other services provided to franchisees based on a certain percentage of sales, as those sales occur.
Note 5 – Earnings Per Common Share (“EPS”)
The following table summarizes the components of basic and diluted EPS (in millions, except per share data):
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||||
Net Income – Yum China Holdings, Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive share-based awards(a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common and dilutive potential common shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic Earnings Per Common Share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted Earnings Per Common Share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Share-based awards excluded from the diluted EPS computation(b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 6 – Equity
Share Repurchase and Retirement
As of June 30, 2025, our Board of Directors authorized an aggregate of $
Of the shares repurchased for the year to date ended June 30, 2025,
The Inflation Reduction Act of 2022 (“IRA”), which is discussed further in Note 12, imposes an excise tax of
Note 7 – Supplemental Balance Sheet Information
Accounts Receivable, net |
|
6/30/2025 |
|
|
12/31/2024 |
|
||
Accounts receivable, gross |
|
$ |
|
|
$ |
|
||
Allowance for doubtful accounts |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
15
Prepaid Expenses and Other Current Assets |
|
6/30/2025 |
|
|
12/31/2024 |
|
||
Value-added tax (“VAT”) assets |
|
$ |
|
|
$ |
|
||
Interest receivables |
|
|
|
|
|
|
||
Receivables from payment processors and aggregators |
|
|
|
|
|
|
||
Deposits, primarily lease deposits |
|
|
|
|
|
|
||
Other prepaid expenses and current assets |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Property, Plant and Equipment (“PP&E”) |
|
6/30/2025 |
|
|
12/31/2024 |
|
||
Buildings and improvements, and construction in progress |
|
$ |
|
|
$ |
|
||
Finance leases, primarily buildings |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
||
PP&E, gross |
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
PP&E, net |
|
$ |
|
|
$ |
|
||
Equity Investments |
|
6/30/2025 |
|
|
12/31/2024 |
|
||
Investment in equity method investees |
|
$ |
|
|
$ |
|
||
Investment in equity securities |
|
|
|
|
|
|
||
Investment in available-for-sale debt securities |
|
|
|
|
|
— |
|
|
Equity investments |
|
$ |
|
|
$ |
|
||
Other Assets |
|
6/30/2025 |
|
|
12/31/2024 |
|
||
Land use right |
|
$ |
|
|
$ |
|
||
Long-term deposits, primarily lease deposits |
|
|
|
|
|
|
||
Prepayment for acquisition of PP&E |
|
|
|
|
|
|
||
VAT assets |
|
|
|
|
|
|
||
Costs to obtain contracts |
|
|
|
|
|
|
||
Others |
|
|
|
|
|
|
||
Other assets |
|
$ |
|
|
$ |
|
||
Accounts Payable and Other Current Liabilities |
|
6/30/2025 |
|
|
12/31/2024 |
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Operating lease liabilities |
|
|
|
|
|
|
||
Accrued compensation and benefits |
|
|
|
|
|
|
||
Contract liabilities |
|
|
|
|
|
|
||
Accrued capital expenditures |
|
|
|
|
|
|
||
Dividends payable |
|
|
|
|
|
|
||
Accrued marketing expenses |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Accounts payable and other current liabilities |
|
$ |
|
|
$ |
|
||
Other Liabilities |
|
6/30/2025 |
|
|
12/31/2024 |
|
||
Contract liabilities |
|
$ |
|
|
$ |
|
||
Accrued income tax payable |
|
|
|
|
|
|
||
Other non-current liabilities |
|
|
|
|
|
|
||
Other liabilities |
|
$ |
|
|
$ |
|
||
16
Note 8 – Goodwill and Intangible Assets
The changes in the carrying amount of goodwill are as follows:
|
|
Total |
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other |
|
||||
Balance as of 12/31/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodwill, gross |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Accumulated impairment losses(a) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Goodwill, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of currency translation adjustments |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance as of 6/30/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodwill, gross |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accumulated impairment losses(a) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Goodwill, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intangible assets, net as of June 30, 2025 and December 31, 2024 are as follows:
|
|
6/30/2025 |
|
|
12/31/2024 |
|
||||||||||||||||||||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Accumulated Impairment Losses(b) |
|
|
Net Carrying Amount |
|
|
Gross |
|
|
Accumulated |
|
|
Accumulated Impairment Losses(b) |
|
|
Net Carrying Amount |
|
||||||||
Finite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Reacquired franchise |
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
|
||||
Huang Ji Huang |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
||||
Daojia platform |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
||
Customer-related assets |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
||
Others |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
||||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Indefinite-lived intangible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Little Sheep trademark |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||||
Huang Ji Huang |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Amortization expense for finite-lived intangible assets was less than $
Note 9 – Short-term Borrowings
As of December 31, 2024, we had outstanding short-term bank borrowings of $
17
Note 10 – Leases
As of June 30, 2025, we leased over
In limited cases, we sub-lease certain restaurants to franchisees in connection with refranchising transactions or lease our properties to other third parties. The lease payments under these leases are generally based on the higher of a fixed base rent or a percentage of the restaurant’s annual sales. Income from sub-lease agreements with franchisees or lease agreements with other third parties are included in Franchise fees and income and Other revenues, respectively, within our Condensed Consolidated Statements of Income.
Supplemental Balance Sheet |
|
|
|
|
|
|
|
|
||
|
|
6/30/2025 |
|
|
12/31/2024 |
|
|
Account Classification |
||
Assets |
|
|
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
$ |
|
|
$ |
|
|
Operating lease right-of-use assets |
||
Finance lease right-of-use assets |
|
|
|
|
|
|
|
PP&E, net |
||
Total leased assets(a) |
|
$ |
|
|
$ |
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
|
|
||
Current |
|
|
|
|
|
|
|
|
||
Operating lease liabilities |
|
$ |
|
|
$ |
|
|
Accounts payable and other current liabilities |
||
Finance lease liabilities |
|
|
|
|
|
|
|
Accounts payable and other current liabilities |
||
Non-current |
|
|
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
|
Non-current operating lease liabilities |
||
Finance lease liabilities |
|
|
|
|
|
|
|
Non-current finance lease liabilities |
||
Total lease liabilities(a) |
|
$ |
|
|
$ |
|
|
|
||
Summary of Lease Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
|
|
||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Account Classification |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Occupancy and other operating expenses, |
||||
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of leased assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy and other operating expenses |
||||
Interest on lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net |
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy and other operating expenses |
||||
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy and other operating expenses |
||||
Sub-lease income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Franchise fees and income or |
Total lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
||||
18
Supplemental Cash Flow Information |
|
|
|
|
|
|
||
|
|
Year to Date Ended |
|
|||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
||
Operating cash flows from finance leases |
|
|
|
|
|
|
||
Financing cash flows from finance leases |
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for lease liabilities(b): |
|
|
|
|
|
|
||
Operating leases |
|
$ |
|
|
$ |
|
||
Finance leases |
|
|
|
|
|
|
||
Lease Term and Discount Rate |
|
|
|
|
|
|
||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||
Weighted-average remaining lease term (years) |
|
|
|
|
|
|
||
Operating leases |
|
|
|
|
|
|
||
Finance leases |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Weighted-average discount rate |
|
|
|
|
|
|
||
Operating leases |
|
|
% |
|
|
% |
||
Finance leases |
|
|
% |
|
|
% |
||
Summary of Future Lease Payments and Lease Liabilities
Maturities of lease liabilities as of June 30, 2025 were as follows:
|
|
Amount of |
|
|
Amount of |
|
|
Total |
|
|||
Remainder of 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2026 |
|
|
|
|
|
|
|
|
|
|||
2027 |
|
|
|
|
|
|
|
|
|
|||
2028 |
|
|
|
|
|
|
|
|
|
|||
2029 |
|
|
|
|
|
|
|
|
|
|||
Thereafter |
|
|
|
|
|
|
|
|
|
|||
Total undiscounted lease payment |
|
|
|
|
|
|
|
|
|
|||
Less: imputed interest(c) |
|
|
|
|
|
|
|
|
|
|||
Present value of lease liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
As of June 30, 2025, we have additional lease agreements that have been signed but not yet commenced, with total undiscounted minimum lease payments of $
Note 11 – Fair Value Measurements and Disclosures
The Company’s financial assets and liabilities primarily consist of cash and cash equivalents, short-term investments, long-term bank deposits and notes, accounts receivable, accounts payable, short-term borrowings and lease liabilities, and the carrying values of these assets and liabilities approximate their fair value in general.
The Company’s financial assets also include its investment in equity securities and available-for-sale debt securities as disclosed in Note 3. Investment in equity securities is measured at fair value based on the closing market price for the shares at the end of each reporting period, with subsequent fair value changes recorded in our Condensed Consolidated Statements of Income. Investment in available-for-sales debt securities is measured at estimated fair value with subsequent fair value changes recorded in Comprehensive income (loss) in the Condensed Consolidated Statements of Comprehensive Income.
19
The following table is a summary of our financial assets measured on a recurring basis or disclosed at fair value and the level within the fair value hierarchy in which the measurement falls. The Company classifies its cash equivalents, short-term investments, long-term bank deposits and notes, and investment in equity securities within Level 1 or Level 2 in the fair value hierarchy because it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value, respectively. The Company classifies its investment in available-for-sale debt securities as Level 3 in the fair value hierarchy because it is valued based on unobservable inputs.
|
|
|
|
|
Fair Value Measurement or Disclosure |
|
||||||||||
|
|
Balance at |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed income debt securities(a) |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed income debt securities(a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Variable return investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Structured deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total short-term investments |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Long-term bank deposits and notes: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed income bank notes(a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total long-term bank deposits and notes |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Equity investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment in equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment in available-for-sale debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total equity investments |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
Fair Value Measurement or Disclosure |
|
||||||||||
|
|
Balance at |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed income debt securities(a) |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Structured deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Variable return investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total short-term investments |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Long-term bank deposits and notes: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed income bank notes(a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total long-term bank deposits and notes |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Equity investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment in equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
20
The Company is required to place bank deposits or purchase insurance to secure the balance of prepaid stored-value cards issued by the Company pursuant to regulatory requirements. $
Non-Recurring Fair Value Measurements
In addition, certain of the Company’s restaurant-level assets (including operating lease ROU assets and PP&E), goodwill and intangible assets are measured at fair value based on unobservable inputs (Level 3) on a non-recurring basis, if determined to be impaired.
In determining the fair value of restaurant-level assets, the Company considered the highest and best use of the assets from a market participants’ perspective, which is represented by the higher of the forecasted discounted cash flows from operating restaurants and the price market participants would pay to sub-lease the ROU assets and acquire the remaining restaurants assets, even if that use differs from the current use by the Company. The after-tax cash flows incorporate reasonable assumptions we believe a franchisee would make, such as sales growth, and include a deduction for royalties we would receive under a franchise agreement with terms substantially at market. The discount rate used in the fair value calculation is our estimate of the required rate-of-return that a franchisee would expect to receive when purchasing a similar restaurant and the related long-lived assets. In situations where the highest and best use of restaurant-level assets are represented by sub-leasing the operating lease ROU assets and acquiring the remaining restaurant assets, the Company continues to use these assets in operating its restaurant business, which is consistent with its long-term strategy of growing revenue through operating restaurant concepts.
As of each relevant measurement date, the fair value of restaurant-level assets, if determined to be impaired, is primarily represented by a price market participant would pay to sub-lease the operating lease ROU assets and acquire the remaining restaurant assets, which reflects the highest and best use of the assets. Significant unobservable inputs used in the fair value measurement include market rental prices, which were determined with the assistance of an independent valuation specialist. The direct comparison approach is used as the valuation technique by assuming a sub-lease of each of the properties in its existing state with vacant possession. By making reference to lease transactions as available in the relevant market, comparable properties in close proximity have been selected and adjustments have been made to account for any difference in factors such as location and property size.
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
|
|
||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Account Classification |
||||
Restaurant-level impairment(a) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Closure and impairment expenses, net |
||||
Note 12 – Income Taxes
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||||
Income tax provision |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Effective tax rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
The higher effective tax rate for the quarter ended June 30, 2025 was primarily due to higher withholding tax associated with higher planned repatriation of earnings outside of China, and the impact from fair value change of our investment in Meituan.
The higher effective tax rate for the year to date ended June 30, 2025 was primarily due to higher withholding tax associated with higher planned repatriation of earnings outside of China, less interest income subject to lower income tax rates, and the impact from fair value change of our investment in Meituan.
21
In December 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”), which included a broad range of tax reforms. The Tax Act requires a U.S. shareholder to be subject to tax on Global Intangible Low Taxed Income (“GILTI”) earned by certain foreign subsidiaries. We have elected the option to account for current year GILTI tax as a period cost as incurred, and therefore included it in estimating the annual effective tax rate.
In August 2022, the IRA was signed into law in the U.S., which contains certain tax measures, including a Corporate Alternative Minimum Tax (“CAMT”) of
In December 2022, a refined Foreign Sourced Income Exemption (“FSIE”) regime was published in Hong Kong and took effect from January 1, 2023. Under the new FSIE regime, certain foreign sourced income would be deemed as being sourced from Hong Kong and chargeable to Hong Kong Profits Tax, if the recipient entity fails to meet the prescribed exception requirements. Certain dividends, interests and disposal gains, if any, received by us and our Hong Kong subsidiaries may be subject to the new tax regime. Based on our analysis, this legislation did not have a material impact on our financial statements. The Company will monitor the developments and continue to evaluate the impact, if any.
The Organization for Economic Cooperation and Development (the “OECD”), the European Union and other jurisdictions (including jurisdictions in which we have operations or presence) have committed to enacting substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed. In particular, the OECD’s Pillar Two initiative introduced a
In July 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law in the U.S.. The OBBBA includes a broad range of provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and others. We are in the process of evaluating the impact on our financial statements, if any.
We are subject to reviews, examinations and audits by Chinese tax authorities, the IRS and other tax authorities with respect to income and non-income based taxes. Since 2016, we have been under a national audit on transfer pricing by the Chinese State Taxation Administration (the “STA”) in China regarding our related party transactions for the period from 2006 to 2015. The information and views currently exchanged with the tax authorities focus on our franchise arrangement with YUM. We continue to provide information requested by the tax authorities to the extent it is available to the Company. It is reasonably possible that there could be significant developments, including expert review and assessment by the STA, within the next 12 months. The ultimate assessment and decision of the STA will depend upon further review of the information provided, as well as ongoing technical and other discussions with the STA and in-charge local tax authorities, and therefore, it is not possible to reasonably estimate the potential impact at this time. We will continue to defend our transfer pricing position. However, if the STA prevails in the assessment of additional tax due based on its ruling, the assessed tax, interest and penalties, if any, could have a material adverse impact on our financial position, results of operations and cash flows.
Note 13 – Segment Reporting
We have
22
|
|
Quarter Ended 6/30/2025 |
|
|||||||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other |
|
|
Corporate and Unallocated(a) |
|
|
Combined |
|
|
Elimination |
|
|
Consolidated |
|
|||||||
Revenue from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
(b) |
$ |
|
|
$ |
— |
|
|
$ |
|
||||||
Inter-segment revenue(c) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Food and paper |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Payroll and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||||
Occupancy and other operating |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
Franchise expenses |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Expenses for transactions with |
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
|
|
|
|
— |
|
|
|
|
||||||
Other operating costs and |
|
|
|
|
|
|
|
|
|
(c) |
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Closures and impairment |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Other income, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating Profit (Loss) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Interest income, net(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Investment loss(a) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||||
Income Before Income Taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||||
|
|
Quarter Ended 6/30/2024 |
|
|||||||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other |
|
|
Corporate and Unallocated(a) |
|
|
Combined |
|
|
Elimination |
|
|
Consolidated |
|
|||||||
Revenue from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
(b) |
$ |
|
|
$ |
— |
|
|
$ |
|
||||||
Inter-segment revenue(c) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Food and paper |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Payroll and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||||
Occupancy and other operating |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
Franchise expenses |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Expenses for transactions with |
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
|
|
|
|
— |
|
|
|
|
||||||
Other operating costs and |
|
|
|
|
|
|
|
|
|
(c) |
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Closures and impairment |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating Profit (Loss) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Interest income, net(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Investment gain(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Income Before Income Taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||||
23
|
|
Year to Date Ended 6/30/2025 |
|
|||||||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other |
|
|
Corporate and Unallocated(a) |
|
|
Combined |
|
|
Elimination |
|
|
Consolidated |
|
|||||||
Revenue from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
(b) |
$ |
|
|
$ |
— |
|
|
$ |
|
||||||
Inter-segment revenue(c) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Food and paper |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Payroll and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Occupancy and other operating |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
Franchise expenses |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Expenses for transactions with |
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
|
|
|
|
— |
|
|
|
|
||||||
Other operating costs and |
|
|
|
|
|
|
|
|
|
(c) |
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Closures and impairment |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Other income, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating Profit (Loss) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Interest income, net(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Investment loss(a) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||||
Income Before Income Taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||||
|
|
Year to Date Ended 6/30/2024 |
|
|||||||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other |
|
|
Corporate and Unallocated(a) |
|
|
Combined |
|
|
Elimination |
|
|
Consolidated |
|
|||||||
Revenue from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
(b) |
$ |
|
|
$ |
— |
|
|
$ |
|
||||||
Inter-segment revenue(c) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Food and paper |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Payroll and employee benefits |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|
|||||
Occupancy and other operating |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
Franchise expenses |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Expenses for transactions with |
|
|
|
|
|
|
|
|
|
|
|
|
(b) |
|
|
|
|
— |
|
|
|
|
||||||
Other operating costs and |
|
|
|
|
|
|
|
|
|
(c) |
|
|
|
|
|
|
|
( |
) |
|
|
|
||||||
Closures and impairment |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Other income, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Operating Profit (Loss) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Interest income, net(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Investment gain(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Income Before Income Taxes and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||||
24
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
||||||||||
Depreciation and Amortization |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||||
KFC |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Pizza Hut |
|
|
|
|
|
|
|
|
|
|
|
|
||||
All Other Segments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate and Unallocated |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
||||||||||
Impairment Charges |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||||
KFC(d) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Pizza Hut(d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
All Other Segments(d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
||||||||||
Capital Spending |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||||
KFC |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Pizza Hut |
|
|
|
|
|
|
|
|
|
|
|
|
||||
All Other Segments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate and Unallocated |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Total Assets |
|
|||||
|
|
6/30/2025 |
|
|
12/31/2024 |
|
||
KFC |
|
$ |
|
|
$ |
|
||
Pizza Hut |
|
|
|
|
|
|
||
All Other Segments |
|
|
|
|
|
|
||
Corporate and Unallocated(e) |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
As substantially all of the Company’s revenue is derived from the PRC and substantially all of the Company’s long-lived assets are located in the PRC, no geographical information is presented. In addition, revenue derived from and long-lived assets located in the U.S., the Company’s country of domicile, are immaterial.
25
Note 14 – Contingencies
Indemnification of China Tax on Indirect Transfers of Assets
In February 2015, the STA issued Bulletin 7 on Income arising from Indirect Transfers of Assets by Non-Resident Enterprises. Pursuant to Bulletin 7, an “indirect transfer” of Chinese taxable assets, including equity interests in a Chinese resident enterprise, by a non-resident enterprise, may be recharacterized and treated as a direct transfer of Chinese taxable assets, if such arrangement does not have reasonable commercial purpose and the transferor has avoided payment of Chinese enterprise income tax. As a result, gains derived from such an indirect transfer may be subject to Chinese enterprise income tax at a rate of
YUM concluded and we concurred that it is more likely than not that YUM will not be subject to this tax with respect to the distribution. However, there are significant uncertainties regarding what constitutes a reasonable commercial purpose, how the safe harbor provisions for group restructurings are to be interpreted, and how the taxing authorities will ultimately view the distribution. As a result, YUM’s position could be challenged by Chinese tax authorities resulting in a
Any tax liability arising from the application of Bulletin 7 to the distribution is expected to be settled in accordance with the tax matters agreement between the Company and YUM. Pursuant to the tax matters agreement, to the extent any Chinese indirect transfer tax pursuant to Bulletin 7 is imposed, such tax and related losses will be allocated between YUM and the Company in proportion to their respective share of the combined market capitalization of YUM and the Company during the 30 trading days after the separation. Such a settlement could be significant and have a material adverse effect on our results of operations and our financial condition. At the inception of the tax indemnity being provided to YUM, the fair value of the non-contingent obligation to stand ready to perform was insignificant and the liability for the contingent obligation to make payment was not probable or estimable.
Legal Proceedings
The Company is subject to various lawsuits covering a variety of allegations from time to time. The Company believes that the ultimate liability, if any, in excess of amounts already provided for these matters in the Condensed Consolidated Financial Statements, is not likely to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. Matters faced by the Company from time to time include, but are not limited to, claims from landlords, employees, customers and others related to operational, contractual or employment issues.
Note 15 – Subsequent Events
Cash Dividend
On
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References to the Company throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations (this “MD&A”) are made using the first person notations of “we,” “us” or “our.” This MD&A contains forward-looking statements, including statements with respect to the ongoing transfer pricing audit, the retail tax structure reform, our growth plans, future capital resources to fund our operations and anticipated capital expenditures, share repurchases and dividends, and the impact of new accounting pronouncements not yet adopted. See “Cautionary Note Regarding Forward-Looking Statements” at the end of this Item 2 for information regarding forward-looking statements.
Introduction
Yum China Holdings, Inc. is the largest restaurant company in China in terms of 2024 system sales, with 16,978 restaurants covering over 2,400 cities primarily in China as of June 30, 2025. Our growing restaurant network consists of our flagship KFC and Pizza Hut brands, as well as emerging brands such as Lavazza, Huang Ji Huang, Little Sheep and Taco Bell. We have the exclusive right to operate and sublicense the KFC, Pizza Hut and, subject to achieving certain agreed-upon milestones, Taco Bell brands in China (excluding Hong Kong, Macau and Taiwan), and own the intellectual property of the Little Sheep and Huang Ji Huang concepts outright. We also established a joint venture with Lavazza Group, the world-renowned family-owned Italian coffee company, to explore and develop the Lavazza coffee concept in China. KFC was the first major global restaurant brand to enter China in 1987. With more than 35 years of operations, we have developed extensive operating experience in the China market. We believe that there are significant opportunities to further expand within China, and we intend to focus our efforts on increasing our geographic footprint in both existing and new cities.
KFC is the leading and the largest quick-service restaurant (“QSR”) brand in China in terms of system sales. As of June 30, 2025, KFC operated 12,238 restaurants in over 2,400 cities across China.
Pizza Hut is the leading and the largest casual dining restaurant (“CDR”) brand in China in terms of system sales and number of restaurants. As of June 30, 2025, Pizza Hut operated 3,864 restaurants in over 900 cities.
Overview
We intend for this MD&A to provide the reader with information that will assist in understanding our results of operations, including metrics that management uses to assess the Company’s performance. Throughout this MD&A, we discuss the following performance metrics:
27
All Note references in this MD&A refer to the Notes to the Condensed Consolidated Financial Statements. Tabular amounts are displayed in millions of U.S. dollars except percentages and per share and unit count amounts, or as otherwise specifically identified. Percentages may not recompute due to rounding. References to quarters are references to the Company’s fiscal quarters.
Quarters and Years to Date Ended June 30, 2025 and 2024
Results of Operations
Summary
The Company has two reportable segments: KFC and Pizza Hut. Our non-reportable operating segments, including the operations of Lavazza, Huang Ji Huang, Little Sheep, Taco Bell, and our delivery operating segment, and for 2024, also including e-commerce segment, are combined and referred to as All Other Segments, as those operating segments are insignificant both individually and in the aggregate. Additional details on our reportable operating segments are included in Note 13.
|
Quarter Ended |
|
|
%/ppts Change |
|
|
Year to Date Ended |
|
|
%/ppts Change |
|
|
||||||||||||||||||||
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
|
Ex F/X |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
|
Ex F/X |
|
|
||||||||
System Sales Growth(a) (%) |
|
4 |
|
|
|
4 |
|
|
NM |
|
|
NM |
|
|
|
3 |
|
|
|
5 |
|
|
NM |
|
|
NM |
|
|
||||
Same-Store Sales Growth |
|
1 |
|
|
|
(4 |
) |
|
NM |
|
|
NM |
|
|
Even |
|
|
|
(3 |
) |
|
NM |
|
|
NM |
|
|
|||||
Operating Profit |
|
304 |
|
|
|
266 |
|
|
|
+14 |
|
|
|
+14 |
|
|
|
703 |
|
|
|
640 |
|
|
|
+10 |
|
|
|
+11 |
|
|
Adjusted Operating Profit(b) |
|
304 |
|
|
|
266 |
|
|
|
+14 |
|
|
|
+14 |
|
|
|
703 |
|
|
|
640 |
|
|
|
+10 |
|
|
|
+11 |
|
|
Core Operating Profit(b) |
|
303 |
|
|
|
266 |
|
|
NM |
|
|
|
+14 |
|
|
|
708 |
|
|
|
640 |
|
|
NM |
|
|
|
+11 |
|
|
||
OP Margin(c) (%) |
|
10.9 |
|
|
|
9.9 |
|
|
|
+1.0 |
|
|
|
+1.0 |
|
|
|
12.2 |
|
|
|
11.4 |
|
|
|
+0.8 |
|
|
|
+0.8 |
|
|
Core OP Margin(b) (%) |
|
10.9 |
|
|
|
9.9 |
|
|
NM |
|
|
|
+1.0 |
|
|
|
12.2 |
|
|
|
11.4 |
|
|
NM |
|
|
|
+0.8 |
|
|
||
Net Income |
|
215 |
|
|
|
212 |
|
|
|
+1 |
|
|
|
+1 |
|
|
|
507 |
|
|
|
499 |
|
|
|
+1 |
|
|
|
+2 |
|
|
Adjusted Net Income(b) |
|
215 |
|
|
|
212 |
|
|
|
+1 |
|
|
|
+1 |
|
|
|
507 |
|
|
|
499 |
|
|
|
+1 |
|
|
|
+2 |
|
|
Diluted Earnings Per |
|
0.58 |
|
|
|
0.55 |
|
|
|
+5 |
|
|
|
+5 |
|
|
|
1.35 |
|
|
|
1.26 |
|
|
|
+7 |
|
|
|
+8 |
|
|
Adjusted Diluted Earnings |
|
0.58 |
|
|
|
0.55 |
|
|
|
+5 |
|
|
|
+5 |
|
|
|
1.35 |
|
|
|
1.26 |
|
|
|
+7 |
|
|
|
+8 |
|
|
NM refers to not meaningful.
As compared to the second quarter of 2024, Total revenues in the second quarter of 2025 increased 4%, including or excluding the impact of F/X. Total revenues for the year to date ended June 30, 2025 increased 2%, or 3% excluding the impact of F/X. The increase in Total revenues for the quarter ended June 30, 2025, excluding the impact of F/X, was primarily driven by 3% net new unit contribution and 1% same-store sales growth. The increase in Total revenues for the year to date ended June 30, 2025, excluding the impact of F/X, was primarily driven by 3% net new unit contribution.
Operating profit for the second quarter increased 14%, including or excluding the impact of F/X. Operating profit for the year to date ended June 30, 2025 increased 10%, or 11% excluding the impact of F/X. The increase in Operating profit for the quarter and year to date ended June 30, 2025 was primarily driven by the increase in Total revenues, favorable commodity prices and efficiency improvement from streamlined operations, partially offset by increased value-for-money offerings, increased delivery cost associated with higher delivery sales mix in the current period and wage inflation in the low single digits.
28
The Consolidated Results of Operations for the quarters and years to date ended June 30, 2025 and 2024 and other data are presented below:
|
|
Quarter Ended |
|
|
% B/(W)(a) |
|
Year to Date Ended |
|
|
% B/(W)(a) |
||||||||||||||||||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
Ex F/X |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
Ex F/X |
||||||||||||||||
Company sales |
|
$ |
2,613 |
|
|
$ |
2,528 |
|
|
|
3 |
|
|
|
|
3 |
|
|
|
$ |
5,414 |
|
|
$ |
5,322 |
|
|
|
2 |
|
|
|
|
2 |
|
|
Franchise fees and income |
|
|
24 |
|
|
|
22 |
|
|
|
11 |
|
|
|
|
11 |
|
|
|
|
51 |
|
|
|
47 |
|
|
|
9 |
|
|
|
|
9 |
|
|
Revenues from transactions with |
|
|
115 |
|
|
|
96 |
|
|
|
20 |
|
|
|
|
20 |
|
|
|
|
236 |
|
|
|
203 |
|
|
|
16 |
|
|
|
|
17 |
|
|
Other revenues |
|
|
35 |
|
|
|
33 |
|
|
|
6 |
|
|
|
|
6 |
|
|
|
|
67 |
|
|
|
65 |
|
|
|
3 |
|
|
|
|
3 |
|
|
Total revenues |
|
$ |
2,787 |
|
|
$ |
2,679 |
|
|
|
4 |
|
|
|
|
4 |
|
|
|
$ |
5,768 |
|
|
$ |
5,637 |
|
|
|
2 |
|
|
|
|
3 |
|
|
Company restaurant expenses |
|
$ |
2,191 |
|
|
$ |
2,137 |
|
|
|
(3 |
) |
|
|
|
(2 |
) |
|
|
$ |
4,472 |
|
|
$ |
4,438 |
|
|
|
(1 |
) |
|
|
|
(1 |
) |
|
Operating Profit |
|
$ |
304 |
|
|
$ |
266 |
|
|
|
14 |
|
|
|
|
14 |
|
|
|
$ |
703 |
|
|
$ |
640 |
|
|
|
10 |
|
|
|
|
11 |
|
|
OP Margin (%) |
|
|
10.9 |
% |
|
|
9.9 |
% |
|
|
1.0 |
|
ppts. |
|
|
1.0 |
|
ppts. |
|
|
12.2 |
% |
|
|
11.4 |
% |
|
|
0.8 |
|
ppts. |
|
|
0.8 |
|
ppts. |
Interest income, net |
|
|
25 |
|
|
|
31 |
|
|
|
(21 |
) |
|
|
|
(21 |
) |
|
|
|
51 |
|
|
|
69 |
|
|
|
(26 |
) |
|
|
|
(26 |
) |
|
Investment (loss) gain |
|
|
(18 |
) |
|
|
8 |
|
|
NM |
|
|
|
NM |
|
|
|
|
(15 |
) |
|
|
16 |
|
|
NM |
|
|
|
NM |
|
|
||||
Income tax provision |
|
|
(80 |
) |
|
|
(77 |
) |
|
|
(4 |
) |
|
|
|
(3 |
) |
|
|
|
(199 |
) |
|
|
(190 |
) |
|
|
(5 |
) |
|
|
|
(5 |
) |
|
Equity in net earnings (losses) from |
|
|
2 |
|
|
|
— |
|
|
NM |
|
|
|
NM |
|
|
|
|
6 |
|
|
|
— |
|
|
NM |
|
|
|
NM |
|
|
||||
Net Income – including |
|
|
233 |
|
|
|
228 |
|
|
|
2 |
|
|
|
|
1 |
|
|
|
|
546 |
|
|
|
535 |
|
|
|
2 |
|
|
|
|
2 |
|
|
Net Income – noncontrolling |
|
|
18 |
|
|
|
16 |
|
|
|
(9 |
) |
|
|
|
(10 |
) |
|
|
|
39 |
|
|
|
36 |
|
|
|
(6 |
) |
|
|
|
(8 |
) |
|
Net Income – Yum China |
|
$ |
215 |
|
|
$ |
212 |
|
|
|
1 |
|
|
|
|
1 |
|
|
|
$ |
507 |
|
|
$ |
499 |
|
|
|
1 |
|
|
|
|
2 |
|
|
Diluted Earnings Per Common Share |
|
$ |
0.58 |
|
|
$ |
0.55 |
|
|
|
5 |
|
|
|
|
5 |
|
|
|
$ |
1.35 |
|
|
$ |
1.26 |
|
|
|
7 |
|
|
|
|
8 |
|
|
Effective tax rate |
|
|
25.8 |
% |
|
|
25.2 |
% |
|
|
|
|
|
|
|
|
|
|
26.9 |
% |
|
|
26.2 |
% |
|
|
|
|
|
|
|
|
||||
Supplementary information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Restaurant profit |
|
$ |
422 |
|
|
$ |
391 |
|
|
|
7 |
|
|
|
|
7 |
|
|
|
$ |
942 |
|
|
$ |
884 |
|
|
|
6 |
|
|
|
|
7 |
|
|
Restaurant margin (%) |
|
|
16.1 |
% |
|
|
15.5 |
% |
|
|
0.6 |
|
ppts. |
|
|
0.6 |
|
ppts. |
|
|
17.4 |
% |
|
|
16.6 |
% |
|
|
0.8 |
|
ppts. |
|
|
0.8 |
|
ppts. |
Adjusted Operating Profit |
|
$ |
304 |
|
|
$ |
266 |
|
|
|
|
|
|
|
|
|
|
$ |
703 |
|
|
$ |
640 |
|
|
|
|
|
|
|
|
|
||||
Core Operating Profit |
|
$ |
303 |
|
|
$ |
266 |
|
|
|
|
|
|
|
|
|
|
$ |
708 |
|
|
$ |
640 |
|
|
|
|
|
|
|
|
|
||||
Core OP Margin (%) |
|
|
10.9 |
% |
|
|
9.9 |
% |
|
|
|
|
|
|
|
|
|
|
12.2 |
% |
|
|
11.4 |
% |
|
|
|
|
|
|
|
|
||||
Adjusted Net Income – Yum China |
|
$ |
215 |
|
|
$ |
212 |
|
|
|
|
|
|
|
|
|
|
$ |
507 |
|
|
$ |
499 |
|
|
|
|
|
|
|
|
|
||||
Adjusted Diluted Earnings Per |
|
$ |
0.58 |
|
|
$ |
0.55 |
|
|
|
|
|
|
|
|
|
|
$ |
1.35 |
|
|
$ |
1.26 |
|
|
|
|
|
|
|
|
|
||||
Adjusted Effective Tax Rate |
|
|
25.8 |
% |
|
|
25.2 |
% |
|
|
|
|
|
|
|
|
|
|
26.9 |
% |
|
|
26.2 |
% |
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA |
|
$ |
427 |
|
|
$ |
399 |
|
|
|
|
|
|
|
|
|
|
$ |
941 |
|
|
$ |
894 |
|
|
|
|
|
|
|
|
|
||||
Performance Metrics
|
|
Quarter Ended 6/30/2025 |
|
|
Year to Date Ended 6/30/2025 |
|
||
|
|
% change |
|
|
% change |
|
||
System Sales Growth |
|
|
4 |
% |
|
|
3 |
% |
System Sales Growth, excluding F/X |
|
|
4 |
% |
|
|
3 |
% |
Same-Store Sales Growth |
|
|
1 |
% |
|
Even |
|
|
Unit Count |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
% Increase |
|
|||
Company-owned |
|
|
14,319 |
|
|
|
13,278 |
|
|
|
8 |
|
Franchisees |
|
|
2,659 |
|
|
|
2,145 |
|
|
|
24 |
|
|
|
|
16,978 |
|
|
|
15,423 |
|
|
|
10 |
|
29
Non-GAAP Measures
In addition to the results provided in accordance with GAAP throughout this MD&A, the Company provides the following non-GAAP measures:
These non-GAAP measures are not intended to replace the presentation of our financial results in accordance with GAAP. Rather, the Company believes that the presentation of these non-GAAP measures provides additional information to investors to facilitate the comparison of past and present results, excluding those items that the Company does not believe are indicative of our core operations.
With respect to non-GAAP measures adjusted for Special Items, the Company excludes impact from Special Items for the purpose of evaluating performance internally and uses them as factors in determining compensation for certain employees. Special Items are not included in any of our segment results.
Adjusted EBITDA is defined as net income including noncontrolling interests adjusted for equity in net earnings (losses) from equity method investments, income tax, interest income, net, investment gain or loss, depreciation and amortization, store impairment charges, and Special Items. Store impairment charges included as an adjustment item in Adjusted EBITDA primarily resulted from our semi-annual impairment evaluation of long-lived assets of individual restaurants, and additional impairment evaluation whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. If these restaurant-level assets were not impaired, depreciation of the assets would have been recorded and included in EBITDA. Therefore, store impairment charges were a non-cash item similar to depreciation and amortization of our long-lived assets of restaurants. The Company believes that investors and analysts may find it useful in measuring operating performance without regard to such non-cash items.
Restaurant profit is defined as Company sales less expenses incurred directly by our Company-owned restaurants in generating Company sales, including cost of food and paper, restaurant-level payroll and employee benefits, rent, depreciation and amortization of restaurant-level assets, advertising expenses, and other operating expenses. Company restaurant margin percentage is defined as Restaurant profit divided by Company sales. We also use Restaurant profit and Restaurant margin for the purpose of internally evaluating the performance of our Company-owned restaurants and we believe they provide useful information to investors as to the profitability of our Company-owned restaurants.
Core Operating Profit is defined as Operating Profit adjusted for Special Items, and further excluding Items Affecting Comparability and the impact of F/X. We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Items such as charges, gains and accounting changes, which are viewed by management as significantly impacting the current period or the comparable period, due to changes in policy or other external factors, or non-cash items pertaining to underlying activities that are different from or unrelated to our core operations, are generally considered “Items Affecting Comparability.” Examples of Items Affecting Comparability include, but are not limited to: temporary relief from landlords and government agencies; VAT deductions due to tax policy changes; and amortization of reacquired franchise rights recognized upon acquisitions. We believe presenting Core Operating Profit provides additional information to further enhance comparability of our operating results and we use this measure for purposes of evaluating the performance of our core operations. Core OP margin is defined as Core Operating Profit divided by Total revenues, excluding the impact of F/X.
30
The following table sets forth the reconciliations of the most directly comparable GAAP financial measures to the non-GAAP financial measures:
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reconciliation of Operating Profit to Adjusted Operating Profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating Profit |
|
$ |
304 |
|
|
$ |
266 |
|
|
$ |
703 |
|
|
$ |
640 |
|
Special Items, Operating Profit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted Operating Profit |
|
$ |
304 |
|
|
$ |
266 |
|
|
$ |
703 |
|
|
$ |
640 |
|
Reconciliation of Net Income to Adjusted Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income – Yum China Holdings, Inc. |
|
$ |
215 |
|
|
$ |
212 |
|
|
$ |
507 |
|
|
$ |
499 |
|
Special Items, Net Income –Yum China Holdings, Inc. |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted Net Income – Yum China Holdings, Inc. |
|
$ |
215 |
|
|
$ |
212 |
|
|
$ |
507 |
|
|
$ |
499 |
|
Reconciliation of EPS to Adjusted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic Earnings Per Common Share |
|
$ |
0.58 |
|
|
$ |
0.55 |
|
|
$ |
1.36 |
|
|
$ |
1.27 |
|
Special Items, Basic Earnings Per Common Share |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted Basic Earnings Per Common Share |
|
$ |
0.58 |
|
|
$ |
0.55 |
|
|
$ |
1.36 |
|
|
$ |
1.27 |
|
Diluted Earnings Per Common Share |
|
$ |
0.58 |
|
|
$ |
0.55 |
|
|
$ |
1.35 |
|
|
$ |
1.26 |
|
Special Items, Diluted Earnings Per Common Share |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted Diluted Earnings Per Common Share |
|
$ |
0.58 |
|
|
$ |
0.55 |
|
|
$ |
1.35 |
|
|
$ |
1.26 |
|
Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effective tax rate |
|
|
25.8 |
% |
|
|
25.2 |
% |
|
|
26.9 |
% |
|
|
26.2 |
% |
Impact on effective tax rate as a result of Special Items |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted effective tax rate |
|
|
25.8 |
% |
|
|
25.2 |
% |
|
|
26.9 |
% |
|
|
26.2 |
% |
Net income, along with the reconciliation to Adjusted EBITDA, is presented below:
|
|
Quarter Ended |
|
|
Year to Date Ended |
|
||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
6/30/2025 |
|
|
6/30/2024 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Income – Yum China Holdings, Inc. |
|
$ |
215 |
|
|
$ |
212 |
|
|
$ |
507 |
|
|
$ |
499 |
|
Net income – noncontrolling interests |
|
|
18 |
|
|
|
16 |
|
|
|
39 |
|
|
|
36 |
|
Equity in net (earnings) losses from equity method investments |
|
|
(2 |
) |
|
|
— |
|
|
|
(6 |
) |
|
|
— |
|
Income tax provision |
|
|
80 |
|
|
|
77 |
|
|
|
199 |
|
|
|
190 |
|
Interest income, net |
|
|
(25 |
) |
|
|
(31 |
) |
|
|
(51 |
) |
|
|
(69 |
) |
Investment loss (gain) |
|
|
18 |
|
|
|
(8 |
) |
|
|
15 |
|
|
|
(16 |
) |
Operating Profit |
|
|
304 |
|
|
|
266 |
|
|
|
703 |
|
|
|
640 |
|
Special Items, Operating Profit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted Operating Profit |
|
|
304 |
|
|
|
266 |
|
|
|
703 |
|
|
|
640 |
|
Depreciation and amortization |
|
|
110 |
|
|
|
118 |
|
|
|
219 |
|
|
|
235 |
|
Store impairment charges |
|
|
13 |
|
|
|
15 |
|
|
|
19 |
|
|
|
19 |
|
Adjusted EBITDA |
|
$ |
427 |
|
|
$ |
399 |
|
|
$ |
941 |
|
|
$ |
894 |
|
31
Reconciliation of GAAP Operating Profit to Restaurant Profit is as follows:
|
|
Quarter Ended 6/30/2025 |
|
|||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
GAAP Operating Profit (Loss) |
|
$ |
292 |
|
|
$ |
46 |
|
|
$ |
(1 |
) |
|
$ |
(33 |
) |
|
$ |
— |
|
|
$ |
304 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Franchise fees and income |
|
|
19 |
|
|
|
2 |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
24 |
|
Revenues from transactions with franchisees |
|
|
17 |
|
|
|
1 |
|
|
|
17 |
|
|
|
80 |
|
|
|
— |
|
|
|
115 |
|
Other revenues |
|
|
1 |
|
|
|
6 |
|
|
|
172 |
|
|
|
17 |
|
|
|
(161 |
) |
|
|
35 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses |
|
|
61 |
|
|
|
26 |
|
|
|
8 |
|
|
|
36 |
|
|
|
— |
|
|
|
131 |
|
Franchise expenses |
|
|
9 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10 |
|
Expenses for transactions with franchisees |
|
|
15 |
|
|
|
1 |
|
|
|
16 |
|
|
|
78 |
|
|
|
— |
|
|
|
110 |
|
Other operating costs and expenses |
|
|
1 |
|
|
|
5 |
|
|
|
168 |
|
|
|
17 |
|
|
|
(161 |
) |
|
|
30 |
|
Closures and impairment expenses, net |
|
|
8 |
|
|
|
3 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
12 |
|
Other income, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Restaurant profit |
|
$ |
349 |
|
|
$ |
73 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
422 |
|
Company sales |
|
|
2,059 |
|
|
|
545 |
|
|
|
9 |
|
|
|
— |
|
|
|
— |
|
|
|
2,613 |
|
Restaurant margin (%) |
|
|
16.9 |
% |
|
|
13.3 |
% |
|
|
(11.5 |
)% |
|
N/A |
|
|
N/A |
|
|
|
16.1 |
% |
||
|
|
Quarter Ended 6/30/2024 |
|
|||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
GAAP Operating Profit (Loss) |
|
$ |
264 |
|
|
$ |
40 |
|
|
$ |
(3 |
) |
|
$ |
(35 |
) |
|
$ |
— |
|
|
$ |
266 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Franchise fees and income |
|
|
16 |
|
|
|
2 |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
22 |
|
Revenues from transactions with franchisees |
|
|
12 |
|
|
|
1 |
|
|
|
16 |
|
|
|
67 |
|
|
|
— |
|
|
|
96 |
|
Other revenues |
|
|
3 |
|
|
|
7 |
|
|
|
144 |
|
|
|
16 |
|
|
|
(137 |
) |
|
|
33 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses |
|
|
60 |
|
|
|
27 |
|
|
|
10 |
|
|
|
36 |
|
|
|
— |
|
|
|
133 |
|
Franchise expenses |
|
|
8 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9 |
|
Expenses for transactions with franchisees |
|
|
11 |
|
|
|
1 |
|
|
|
14 |
|
|
|
66 |
|
|
|
— |
|
|
|
92 |
|
Other operating costs and expenses |
|
|
2 |
|
|
|
6 |
|
|
|
142 |
|
|
|
16 |
|
|
|
(137 |
) |
|
|
29 |
|
Closures and impairment expenses, net |
|
|
6 |
|
|
|
5 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
13 |
|
Restaurant profit |
|
$ |
320 |
|
|
$ |
70 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
391 |
|
Company sales |
|
|
1,983 |
|
|
|
530 |
|
|
|
15 |
|
|
|
— |
|
|
|
— |
|
|
|
2,528 |
|
Restaurant margin (%) |
|
|
16.2 |
% |
|
|
13.2 |
% |
|
|
5.9 |
% |
|
N/A |
|
|
N/A |
|
|
|
15.5 |
% |
||
|
|
Year to Date Ended 6/30/2025 |
|
|||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
GAAP Operating Profit (Loss) |
|
$ |
678 |
|
|
$ |
106 |
|
|
$ |
(3 |
) |
|
$ |
(78 |
) |
|
$ |
— |
|
|
$ |
703 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Franchise fees and income |
|
|
40 |
|
|
|
4 |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
51 |
|
Revenues from transactions with franchisees |
|
|
33 |
|
|
|
3 |
|
|
|
36 |
|
|
|
164 |
|
|
|
— |
|
|
|
236 |
|
Other revenues |
|
|
2 |
|
|
|
13 |
|
|
|
342 |
|
|
|
34 |
|
|
|
(324 |
) |
|
|
67 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses |
|
|
120 |
|
|
|
52 |
|
|
|
16 |
|
|
|
81 |
|
|
|
— |
|
|
|
269 |
|
Franchise expenses |
|
|
19 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
Expenses for transactions with franchisees |
|
|
29 |
|
|
|
3 |
|
|
|
33 |
|
|
|
162 |
|
|
|
— |
|
|
|
227 |
|
Other operating costs and expenses |
|
|
2 |
|
|
|
11 |
|
|
|
335 |
|
|
|
34 |
|
|
|
(323 |
) |
|
|
59 |
|
Closures and impairment expenses, net |
|
|
13 |
|
|
|
3 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
18 |
|
Other income, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Restaurant profit (loss) |
|
$ |
786 |
|
|
$ |
157 |
|
|
$ |
(2 |
) |
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
942 |
|
Company sales |
|
|
4,267 |
|
|
|
1,129 |
|
|
|
18 |
|
|
|
— |
|
|
|
— |
|
|
|
5,414 |
|
Restaurant margin (%) |
|
|
18.4 |
% |
|
|
13.9 |
% |
|
|
(16.0 |
)% |
|
N/A |
|
|
N/A |
|
|
|
17.4 |
% |
||
32
|
|
Year to Date Ended 6/30/2024 |
|
|||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
GAAP Operating Profit (Loss) |
|
$ |
636 |
|
|
$ |
87 |
|
|
$ |
(8 |
) |
|
$ |
(75 |
) |
|
$ |
— |
|
|
$ |
640 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Franchise fees and income |
|
|
34 |
|
|
|
4 |
|
|
|
9 |
|
|
|
— |
|
|
|
— |
|
|
|
47 |
|
Revenues from transactions with franchisees |
|
|
26 |
|
|
|
2 |
|
|
|
36 |
|
|
|
139 |
|
|
|
— |
|
|
|
203 |
|
Other revenues |
|
|
8 |
|
|
|
12 |
|
|
|
308 |
|
|
|
31 |
|
|
|
(294 |
) |
|
|
65 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses |
|
|
121 |
|
|
|
54 |
|
|
|
20 |
|
|
|
78 |
|
|
|
— |
|
|
|
273 |
|
Franchise expenses |
|
|
17 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
19 |
|
Expenses for transactions with franchisees |
|
|
23 |
|
|
|
2 |
|
|
|
33 |
|
|
|
138 |
|
|
|
— |
|
|
|
196 |
|
Other operating costs and expenses |
|
|
6 |
|
|
|
11 |
|
|
|
304 |
|
|
|
30 |
|
|
|
(293 |
) |
|
|
58 |
|
Closures and impairment expenses, net |
|
|
7 |
|
|
|
5 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
14 |
|
Other income, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Restaurant profit (loss) |
|
$ |
742 |
|
|
$ |
143 |
|
|
$ |
(2 |
) |
|
$ |
— |
|
|
$ |
1 |
|
|
$ |
884 |
|
Company sales |
|
|
4,176 |
|
|
|
1,117 |
|
|
|
29 |
|
|
|
— |
|
|
|
— |
|
|
|
5,322 |
|
Restaurant margin (%) |
|
|
17.8 |
% |
|
|
12.8 |
% |
|
|
(11.1 |
)% |
|
N/A |
|
|
N/A |
|
|
|
16.6 |
% |
||
Reconciliation of GAAP Operating Profit to Core Operating Profit is as follows:
|
Quarter ended |
|
|
% Change |
|
Year to Date Ended |
|
|
% Change |
||||||||||||||||
|
6/30/2025 |
|
|
6/30/2024 |
|
|
B/(W) |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
B/(W) |
||||||||||
Operating profit |
$ |
304 |
|
|
$ |
266 |
|
|
|
14 |
|
|
|
$ |
703 |
|
|
$ |
640 |
|
|
|
10 |
|
|
Special Items, Operating Profit |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
||
Adjusted Operating Profit |
$ |
304 |
|
|
$ |
266 |
|
|
|
14 |
|
|
|
$ |
703 |
|
|
$ |
640 |
|
|
|
10 |
|
|
Items Affecting Comparability |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
||
F/X impact |
|
(1 |
) |
|
|
— |
|
|
|
|
|
|
|
5 |
|
|
|
— |
|
|
|
|
|
||
Core Operating Profit |
$ |
303 |
|
|
$ |
266 |
|
|
|
14 |
|
|
|
$ |
708 |
|
|
$ |
640 |
|
|
|
11 |
|
|
Total revenues |
|
2,787 |
|
|
|
2,679 |
|
|
|
4 |
|
|
|
|
5,768 |
|
|
|
5,637 |
|
|
|
2 |
|
|
F/X impact |
|
(7 |
) |
|
|
— |
|
|
|
|
|
|
|
31 |
|
|
|
— |
|
|
|
|
|
||
Total revenues, excluding the impact of F/X |
$ |
2,780 |
|
|
$ |
2,679 |
|
|
|
4 |
|
|
|
$ |
5,799 |
|
|
$ |
5,637 |
|
|
|
3 |
|
|
Core OP margin (%) |
|
10.9 |
% |
|
|
9.9 |
% |
|
|
1.0 |
|
ppts. |
|
|
12.2 |
% |
|
|
11.4 |
% |
|
|
0.8 |
|
ppts. |
33
Reconciliation of GAAP Operating Profit to Core Operating Profit by segment is as follows:
|
|
Quarter Ended 6/30/2025 |
|
|||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
GAAP Operating Profit (Loss) |
|
$ |
292 |
|
|
$ |
46 |
|
|
$ |
(1 |
) |
|
$ |
(33 |
) |
|
$ |
— |
|
|
$ |
304 |
|
Special Items, Operating Profit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted Operating Profit (Loss) |
|
$ |
292 |
|
|
$ |
46 |
|
|
$ |
(1 |
) |
|
$ |
(33 |
) |
|
$ |
— |
|
|
$ |
304 |
|
Items Affecting Comparability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
F/X impact |
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Core Operating Profit (Loss) |
|
$ |
291 |
|
|
$ |
46 |
|
|
$ |
(1 |
) |
|
$ |
(33 |
) |
|
$ |
— |
|
|
$ |
303 |
|
|
|
Quarter Ended 6/30/2024 |
|
|||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
GAAP Operating Profit (Loss) |
|
$ |
264 |
|
|
$ |
40 |
|
|
$ |
(3 |
) |
|
$ |
(35 |
) |
|
$ |
— |
|
|
$ |
266 |
|
Special Items, Operating Profit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted Operating Profit (Loss) |
|
$ |
264 |
|
|
$ |
40 |
|
|
$ |
(3 |
) |
|
$ |
(35 |
) |
|
$ |
— |
|
|
$ |
266 |
|
Items Affecting Comparability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
F/X impact |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Core Operating Profit (Loss) |
|
$ |
264 |
|
|
$ |
40 |
|
|
$ |
(3 |
) |
|
$ |
(35 |
) |
|
$ |
— |
|
|
$ |
266 |
|
|
|
Year to Date Ended 6/30/2025 |
|
|||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
GAAP Operating Profit (Loss) |
|
$ |
678 |
|
|
$ |
106 |
|
|
$ |
(3 |
) |
|
$ |
(78 |
) |
|
$ |
— |
|
|
$ |
703 |
|
Special Items, Operating Profit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted Operating Profit (Loss) |
|
$ |
678 |
|
|
$ |
106 |
|
|
$ |
(3 |
) |
|
$ |
(78 |
) |
|
$ |
— |
|
|
$ |
703 |
|
Items Affecting Comparability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
F/X impact |
|
|
4 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Core Operating Profit (Loss) |
|
$ |
682 |
|
|
$ |
107 |
|
|
$ |
(3 |
) |
|
$ |
(78 |
) |
|
$ |
— |
|
|
$ |
708 |
|
|
|
Year to Date Ended 6/30/2024 |
|
|||||||||||||||||||||
|
|
KFC |
|
|
Pizza Hut |
|
|
All Other Segments |
|
|
Corporate |
|
|
Elimination |
|
|
Total |
|
||||||
GAAP Operating Profit (Loss) |
|
$ |
636 |
|
|
$ |
87 |
|
|
$ |
(8 |
) |
|
$ |
(75 |
) |
|
$ |
— |
|
|
$ |
640 |
|
Special Items, Operating Profit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted Operating Profit (Loss) |
|
$ |
636 |
|
|
$ |
87 |
|
|
$ |
(8 |
) |
|
$ |
(75 |
) |
|
$ |
— |
|
|
$ |
640 |
|
Items Affecting Comparability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
F/X impact |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Core Operating Profit (Loss) |
|
$ |
636 |
|
|
$ |
87 |
|
|
$ |
(8 |
) |
|
$ |
(75 |
) |
|
$ |
— |
|
|
$ |
640 |
|
34
Segment Results
KFC
|
|
Quarter Ended |
|
Year to Date Ended |
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
% B/(W) |
|
|
|
|
|
|
|
% B/(W) |
||||||||||||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
Ex F/X |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
Ex F/X |
||||||||||||||||
Company sales |
|
$ |
2,059 |
|
|
$ |
1,983 |
|
|
|
4 |
|
|
|
|
4 |
|
|
|
$ |
4,267 |
|
|
$ |
4,176 |
|
|
|
2 |
|
|
|
|
3 |
|
|
Franchise fees and income |
|
|
19 |
|
|
|
16 |
|
|
|
16 |
|
|
|
|
16 |
|
|
|
|
40 |
|
|
|
34 |
|
|
|
14 |
|
|
|
|
14 |
|
|
Revenues from transactions with |
|
|
17 |
|
|
|
12 |
|
|
|
32 |
|
|
|
|
32 |
|
|
|
|
33 |
|
|
|
26 |
|
|
|
26 |
|
|
|
|
27 |
|
|
Other revenues |
|
|
1 |
|
|
|
3 |
|
|
|
(68 |
) |
|
|
|
(68 |
) |
|
|
|
2 |
|
|
|
8 |
|
|
|
(74 |
) |
|
|
|
(74 |
) |
|
Total revenues |
|
$ |
2,096 |
|
|
$ |
2,014 |
|
|
|
4 |
|
|
|
|
4 |
|
|
|
$ |
4,342 |
|
|
$ |
4,244 |
|
|
|
2 |
|
|
|
|
3 |
|
|
Company restaurant expenses |
|
$ |
1,710 |
|
|
$ |
1,663 |
|
|
|
(3 |
) |
|
|
|
(3 |
) |
|
|
$ |
3,481 |
|
|
$ |
3,434 |
|
|
|
(1 |
) |
|
|
|
(2 |
) |
|
G&A expenses |
|
$ |
61 |
|
|
$ |
60 |
|
|
|
(2 |
) |
|
|
|
(2 |
) |
|
|
$ |
120 |
|
|
$ |
121 |
|
|
|
1 |
|
|
|
|
— |
|
|
Franchise expenses |
|
$ |
9 |
|
|
$ |
8 |
|
|
|
(9 |
) |
|
|
|
(9 |
) |
|
|
$ |
19 |
|
|
$ |
17 |
|
|
|
(9 |
) |
|
|
|
(9 |
) |
|
Expenses for transactions with |
|
$ |
15 |
|
|
$ |
11 |
|
|
|
(37 |
) |
|
|
|
(37 |
) |
|
|
$ |
29 |
|
|
$ |
23 |
|
|
|
(29 |
) |
|
|
|
(30 |
) |
|
Other operating costs and expenses |
|
$ |
1 |
|
|
$ |
2 |
|
|
|
68 |
|
|
|
|
68 |
|
|
|
$ |
2 |
|
|
$ |
6 |
|
|
|
72 |
|
|
|
|
72 |
|
|
Closures and impairment |
|
$ |
8 |
|
|
$ |
6 |
|
|
|
(15 |
) |
|
|
|
(14 |
) |
|
|
$ |
13 |
|
|
$ |
7 |
|
|
|
(65 |
) |
|
|
|
(65 |
) |
|
Operating Profit |
|
$ |
292 |
|
|
$ |
264 |
|
|
|
11 |
|
|
|
|
10 |
|
|
|
$ |
678 |
|
|
$ |
636 |
|
|
|
6 |
|
|
|
|
7 |
|
|
OP Margin (%) |
|
|
14.0 |
% |
|
|
13.1 |
% |
|
|
0.9 |
|
ppts. |
|
|
0.9 |
|
ppts. |
|
|
15.6 |
% |
|
|
15.0 |
% |
|
|
0.6 |
|
ppts. |
|
|
0.6 |
|
ppts. |
Restaurant profit |
|
$ |
349 |
|
|
$ |
320 |
|
|
|
9 |
|
|
|
|
9 |
|
|
|
$ |
786 |
|
|
$ |
742 |
|
|
|
6 |
|
|
|
|
6 |
|
|
Restaurant margin (%) |
|
|
16.9 |
% |
|
|
16.2 |
% |
|
|
0.7 |
|
ppts. |
|
|
0.7 |
|
ppts. |
|
|
18.4 |
% |
|
|
17.8 |
% |
|
|
0.6 |
|
ppts. |
|
|
0.6 |
|
ppts. |
|
|
Quarter Ended 6/30/2025 |
|
|
Year to Date Ended 6/30/2025 |
|
||
|
|
% change |
|
|
% change |
|
||
System Sales Growth |
|
|
5 |
% |
|
|
4 |
% |
System Sales Growth, excluding F/X |
|
|
5 |
% |
|
|
4 |
% |
Same-Store Sales Growth |
|
|
1 |
% |
|
Even |
|
|
Unit Count |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
% Increase |
|
|||
Company-owned |
|
|
10,536 |
|
|
|
9,740 |
|
|
|
8 |
|
Franchisees |
|
|
1,702 |
|
|
|
1,191 |
|
|
|
43 |
|
|
|
|
12,238 |
|
|
|
10,931 |
|
|
|
12 |
|
Company Sales and Restaurant Profit
The changes in Company sales and Restaurant profit were as follows:
|
Quarter Ended |
|
|||||||||||||||||
Income (Expense) |
6/30/2024 |
|
|
Store |
|
|
Other |
|
|
F/X |
|
|
6/30/2025 |
|
|||||
Company sales |
$ |
1,983 |
|
|
$ |
54 |
|
|
$ |
17 |
|
|
$ |
5 |
|
|
$ |
2,059 |
|
Cost of sales |
|
(626 |
) |
|
|
(18 |
) |
|
|
15 |
|
|
|
(2 |
) |
|
|
(631 |
) |
Cost of labor |
|
(513 |
) |
|
|
(15 |
) |
|
|
(27 |
) |
|
|
(1 |
) |
|
|
(556 |
) |
Occupancy and other operating expenses |
|
(524 |
) |
|
|
(13 |
) |
|
|
15 |
|
|
|
(1 |
) |
|
|
(523 |
) |
Restaurant profit |
$ |
320 |
|
|
$ |
8 |
|
|
$ |
20 |
|
|
$ |
1 |
|
|
$ |
349 |
|
35
|
Year to Date Ended |
|
|||||||||||||||||
Income (Expense) |
6/30/2024 |
|
|
Store |
|
|
Other |
|
|
F/X |
|
|
6/30/2025 |
|
|||||
Company sales |
$ |
4,176 |
|
|
$ |
118 |
|
|
$ |
(4 |
) |
|
$ |
(23 |
) |
|
$ |
4,267 |
|
Cost of sales |
|
(1,320 |
) |
|
|
(41 |
) |
|
|
37 |
|
|
|
8 |
|
|
|
(1,316 |
) |
Cost of labor |
|
(1,055 |
) |
|
|
(32 |
) |
|
|
(29 |
) |
|
|
6 |
|
|
|
(1,110 |
) |
Occupancy and other operating expenses |
|
(1,059 |
) |
|
|
(30 |
) |
|
|
29 |
|
|
|
5 |
|
|
|
(1,055 |
) |
Restaurant profit |
$ |
742 |
|
|
$ |
15 |
|
|
$ |
33 |
|
|
$ |
(4 |
) |
|
$ |
786 |
|
As compared to the second quarter of 2024, the increase in Company sales for the quarter, excluding the impact of F/X, was primarily driven by net unit growth and same-store sales growth. The increase in Restaurant profit for the quarter, excluding the impact of F/X, was primarily driven by the increase in Company sales, favorable commodity prices and efficiency improvement from streamlined operations, partially offset by increased rider cost associated with higher delivery sales mix in the current period, increased value-for-money offerings and wage inflation in the low single digits.
The increase in Company sales for the year to date ended June 30, 2025, excluding the impact of F/X, was primarily driven by net unit growth. The year to date increase in Restaurant profit, excluding the impact of F/X, was primarily driven by the increase in Company sales, favorable commodity prices and efficiency improvement from streamlined operations, partially offset by increased value-for-money offerings, increased rider cost associated with higher delivery sales mix in the current period and wage inflation in the low single digits.
Franchise Fees and Income/Revenues from Transactions with Franchisees
The quarter and year to date increase in Franchise fees and income and Revenues from transactions with franchisees, excluding the impact of F/X, was primarily driven by acceleration of franchise store openings.
Operating Profit
The quarter and year to date increase in Operating profit, excluding the impact of F/X, was primarily driven by the increase in Restaurant profit.
Pizza Hut
|
|
Quarter Ended |
|
Year to Date Ended |
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
% B/(W) |
|
|
|
|
|
|
|
|
|
% B/(W) |
|
|
||||||||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
Ex F/X |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
Ex F/X |
||||||||||||||||
Company sales |
|
$ |
545 |
|
|
$ |
530 |
|
|
|
3 |
|
|
|
|
3 |
|
|
|
$ |
1,129 |
|
|
$ |
1,117 |
|
|
|
1 |
|
|
|
|
2 |
|
|
Franchise fees and income |
|
|
2 |
|
|
|
2 |
|
|
|
20 |
|
|
|
|
19 |
|
|
|
|
4 |
|
|
|
4 |
|
|
|
21 |
|
|
|
|
22 |
|
|
Revenues from transactions with |
|
|
1 |
|
|
|
1 |
|
|
|
44 |
|
|
|
|
43 |
|
|
|
|
3 |
|
|
|
2 |
|
|
|
56 |
|
|
|
|
57 |
|
|
Other revenues |
|
|
6 |
|
|
|
7 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
13 |
|
|
|
12 |
|
|
|
9 |
|
|
|
|
9 |
|
|
Total revenues |
|
$ |
554 |
|
|
$ |
540 |
|
|
|
3 |
|
|
|
|
3 |
|
|
|
$ |
1,149 |
|
|
$ |
1,135 |
|
|
|
1 |
|
|
|
|
2 |
|
|
Company restaurant expenses |
|
$ |
472 |
|
|
$ |
460 |
|
|
|
(3 |
) |
|
|
|
(2 |
) |
|
|
$ |
972 |
|
|
$ |
974 |
|
|
|
— |
|
|
|
|
— |
|
|
G&A expenses |
|
$ |
26 |
|
|
$ |
27 |
|
|
|
5 |
|
|
|
|
5 |
|
|
|
$ |
52 |
|
|
$ |
54 |
|
|
|
4 |
|
|
|
|
4 |
|
|
Franchise expenses |
|
$ |
1 |
|
|
$ |
1 |
|
|
|
(14 |
) |
|
|
|
(14 |
) |
|
|
$ |
2 |
|
|
$ |
2 |
|
|
|
(15 |
) |
|
|
|
(15 |
) |
|
Expenses for transactions with |
|
$ |
1 |
|
|
$ |
1 |
|
|
|
(32 |
) |
|
|
|
(32 |
) |
|
|
$ |
3 |
|
|
$ |
2 |
|
|
|
(41 |
) |
|
|
|
(42 |
) |
|
Other operating costs and expenses |
|
$ |
5 |
|
|
$ |
6 |
|
|
|
7 |
|
|
|
|
7 |
|
|
|
$ |
11 |
|
|
$ |
11 |
|
|
|
(3 |
) |
|
|
|
(3 |
) |
|
Closures and impairment |
|
$ |
3 |
|
|
$ |
5 |
|
|
|
37 |
|
|
|
|
38 |
|
|
|
$ |
3 |
|
|
$ |
5 |
|
|
|
38 |
|
|
|
|
38 |
|
|
Operating Profit |
|
$ |
46 |
|
|
$ |
40 |
|
|
|
16 |
|
|
|
|
15 |
|
|
|
$ |
106 |
|
|
$ |
87 |
|
|
|
22 |
|
|
|
|
23 |
|
|
OP Margin (%) |
|
|
8.3 |
% |
|
|
7.4 |
% |
|
|
0.9 |
|
ppts. |
|
|
0.9 |
|
ppts. |
|
|
9.2 |
% |
|
|
7.7 |
% |
|
|
1.5 |
|
ppts. |
|
|
1.5 |
|
ppts. |
Restaurant profit |
|
$ |
73 |
|
|
$ |
70 |
|
|
|
4 |
|
|
|
|
3 |
|
|
|
$ |
157 |
|
|
$ |
143 |
|
|
|
9 |
|
|
|
|
10 |
|
|
Restaurant margin (%) |
|
|
13.3 |
% |
|
|
13.2 |
% |
|
|
0.1 |
|
ppts. |
|
|
0.1 |
|
ppts. |
|
|
13.9 |
% |
|
|
12.8 |
% |
|
|
1.1 |
|
ppts. |
|
|
1.1 |
|
ppts. |
36
|
|
Quarter Ended 6/30/2025 |
|
|
Year to Date Ended 6/30/2025 |
|
||
|
|
% change |
|
|
% change |
|
||
System Sales Growth |
|
|
4 |
% |
|
|
2 |
% |
System Sales Growth, excluding F/X |
|
|
3 |
% |
|
|
3 |
% |
Same-Store Sales Growth |
|
|
2 |
% |
|
|
1 |
% |
Unit Count |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
% Increase |
|
|||
Company-owned |
|
|
3,629 |
|
|
|
3,341 |
|
|
|
9 |
|
Franchisees |
|
|
235 |
|
|
|
163 |
|
|
|
44 |
|
|
|
|
3,864 |
|
|
|
3,504 |
|
|
|
10 |
|
Company Sales and Restaurant Profit
The changes in Company sales and Restaurant profit were as follows:
|
Quarter Ended |
|
|||||||||||||||||
Income (Expense) |
6/30/2024 |
|
|
Store |
|
|
Other |
|
|
F/X |
|
|
6/30/2025 |
|
|||||
Company sales |
$ |
530 |
|
|
$ |
5 |
|
|
$ |
8 |
|
|
$ |
2 |
|
|
$ |
545 |
|
Cost of sales |
|
(167 |
) |
|
|
(1 |
) |
|
|
(8 |
) |
|
|
(1 |
) |
|
|
(177 |
) |
Cost of labor |
|
(150 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
— |
|
|
|
(154 |
) |
Occupancy and other operating expenses |
|
(143 |
) |
|
|
(2 |
) |
|
|
4 |
|
|
|
— |
|
|
|
(141 |
) |
Restaurant profit |
$ |
70 |
|
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
73 |
|
|
Year to Date Ended |
|
|||||||||||||||||
Income (Expense) |
6/30/2024 |
|
|
Store |
|
|
Other |
|
|
F/X |
|
|
6/30/2025 |
|
|||||
Company sales |
$ |
1,117 |
|
|
$ |
15 |
|
|
$ |
3 |
|
|
$ |
(6 |
) |
|
$ |
1,129 |
|
Cost of sales |
|
(365 |
) |
|
|
(4 |
) |
|
|
4 |
|
|
|
2 |
|
|
|
(363 |
) |
Cost of labor |
|
(312 |
) |
|
|
(3 |
) |
|
|
(4 |
) |
|
|
2 |
|
|
|
(317 |
) |
Occupancy and other operating expenses |
|
(297 |
) |
|
|
(6 |
) |
|
|
10 |
|
|
|
1 |
|
|
|
(292 |
) |
Restaurant profit |
$ |
143 |
|
|
$ |
2 |
|
|
$ |
13 |
|
|
$ |
(1 |
) |
|
$ |
157 |
|
As compared to the second quarter of 2024, the increase in Company sales for the quarter, excluding the impact of F/X, was primarily driven by same-store sales growth and net unit growth. The increase in Restaurant profit for the quarter, excluding the impact of F/X, was primarily driven by the increase in Company sales, favorable commodity prices and efficiency improvement from streamlined operations, partially offset by increased value-for-money offerings, with all-you-can-eat campaign shifted to the second quarter this year, increased delivery cost associated with higher delivery sales mix in the current period and wage inflation in the low single digits.
The increase in Company sales for the year to date ended June 30, 2025, excluding the impact of F/X, was primarily driven by net unit growth and same-store sales growth, partially offset by more temporary closures mainly during the Chinese New Year holiday compared with the prior year. The year to date increase in Restaurant profit, excluding the impact of F/X, was primarily driven by the increase in Company sales, favorable commodity prices and efficiency improvement from streamlined operations, partially offset by increased value-for-money offerings, increased delivery cost associated with higher delivery sales mix in the current period and wage inflation in the low single digits.
Operating Profit
The quarter and year to date increase in Operating profit, excluding the impact of F/X, was primarily driven by the increase in Restaurant profit.
37
All Other Segments
All Other Segments reflects the results of Lavazza, Huang Ji Huang, Little Sheep, Taco Bell, our delivery operating segment, and for 2024, also the e-commerce segment.
|
|
Quarter Ended |
|
Year to Date Ended |
|
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
% B/(W) |
|
|
|
|
|
|
|
|
|
% B/(W) |
|
|
||||||||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
Ex F/X |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
Ex F/X |
||||||||||||||||
Company sales |
|
$ |
9 |
|
|
$ |
15 |
|
|
|
(40 |
) |
|
|
|
(40 |
) |
|
|
$ |
18 |
|
|
$ |
29 |
|
|
|
(38 |
) |
|
|
|
(37 |
) |
|
Franchise fees and income |
|
|
3 |
|
|
|
4 |
|
|
|
(16 |
) |
|
|
|
(16 |
) |
|
|
|
7 |
|
|
|
9 |
|
|
|
(16 |
) |
|
|
|
(15 |
) |
|
Revenues from transactions with |
|
|
17 |
|
|
|
16 |
|
|
|
12 |
|
|
|
|
11 |
|
|
|
|
36 |
|
|
|
36 |
|
|
|
(1 |
) |
|
|
|
(1 |
) |
|
Other revenues |
|
|
172 |
|
|
|
144 |
|
|
|
19 |
|
|
|
|
19 |
|
|
|
|
342 |
|
|
|
308 |
|
|
|
11 |
|
|
|
|
12 |
|
|
Total revenues |
|
$ |
201 |
|
|
$ |
179 |
|
|
|
13 |
|
|
|
|
12 |
|
|
|
$ |
403 |
|
|
$ |
382 |
|
|
|
6 |
|
|
|
|
6 |
|
|
Company restaurant expenses |
|
$ |
9 |
|
|
$ |
14 |
|
|
|
29 |
|
|
|
|
29 |
|
|
|
$ |
20 |
|
|
$ |
31 |
|
|
|
35 |
|
|
|
|
34 |
|
|
G&A expenses |
|
$ |
8 |
|
|
$ |
10 |
|
|
|
21 |
|
|
|
|
21 |
|
|
|
$ |
16 |
|
|
$ |
20 |
|
|
|
20 |
|
|
|
|
20 |
|
|
Expenses for transactions with |
|
$ |
16 |
|
|
$ |
14 |
|
|
|
(13 |
) |
|
|
|
(13 |
) |
|
|
$ |
33 |
|
|
$ |
33 |
|
|
|
1 |
|
|
|
|
— |
|
|
Other operating costs and |
|
$ |
168 |
|
|
$ |
142 |
|
|
|
(18 |
) |
|
|
|
(18 |
) |
|
|
$ |
335 |
|
|
$ |
304 |
|
|
|
(11 |
) |
|
|
|
(11 |
) |
|
Closures and impairment |
|
$ |
1 |
|
|
$ |
2 |
|
|
|
39 |
|
|
|
|
40 |
|
|
|
$ |
2 |
|
|
$ |
2 |
|
|
|
(18 |
) |
|
|
|
(17 |
) |
|
Operating Loss |
|
$ |
(1 |
) |
|
$ |
(3 |
) |
|
|
48 |
|
|
|
|
48 |
|
|
|
$ |
(3 |
) |
|
$ |
(8 |
) |
|
|
63 |
|
|
|
|
63 |
|
|
OP Margin (%) |
|
|
(0.8 |
)% |
|
|
(1.7 |
)% |
|
|
0.9 |
|
ppts. |
|
|
0.9 |
|
ppts. |
|
|
(0.8 |
)% |
|
|
(2.2 |
)% |
|
|
1.4 |
|
ppts. |
|
|
1.4 |
|
ppts. |
Restaurant profit (loss) |
|
$ |
— |
|
|
$ |
1 |
|
|
NM |
|
|
|
NM |
|
|
|
$ |
(2 |
) |
|
$ |
(2 |
) |
|
|
10 |
|
|
|
|
9 |
|
|
||
Restaurant margin (%) |
|
|
(11.5 |
)% |
|
|
5.9 |
% |
|
|
(17.4 |
) |
ppts. |
|
|
(17.4 |
) |
ppts. |
|
|
(16.0 |
)% |
|
|
(11.1 |
)% |
|
|
(4.9 |
) |
ppts. |
|
|
(4.9 |
) |
ppts. |
Total Revenues
The quarter and year to date increase in Total revenues of All other segments, excluding the impact of F/X, was primarily driven by inter-segment revenue generated by our delivery team for services provided to Company-owned restaurants as a result of increased delivery sales, partially offset by decline in Company sales.
Operating Loss
The quarter and year to date decrease in Operating loss, excluding the impact of F/X, was primarily driven by the decrease in Operating loss from certain emerging brands.
38
Corporate and Unallocated
|
|
Quarter Ended |
|
Year to Date Ended |
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
% B/(W) |
|
|
|
|
|
|
|
% B/(W) |
||||||||||||||||||||
|
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
Ex F/X |
|
6/30/2025 |
|
|
6/30/2024 |
|
|
Reported |
|
Ex F/X |
||||||||||||||||
Revenues from transactions |
|
$ |
80 |
|
|
$ |
67 |
|
|
|
19 |
|
|
|
|
19 |
|
|
|
$ |
164 |
|
|
$ |
139 |
|
|
|
18 |
|
|
|
|
19 |
|
|
Other revenues |
|
$ |
17 |
|
|
$ |
16 |
|
|
|
6 |
|
|
|
|
6 |
|
|
|
$ |
34 |
|
|
$ |
31 |
|
|
|
9 |
|
|
|
|
10 |
|
|
Expenses for transactions |
|
$ |
78 |
|
|
$ |
66 |
|
|
|
(19 |
) |
|
|
|
(18 |
) |
|
|
$ |
162 |
|
|
$ |
138 |
|
|
|
(18 |
) |
|
|
|
(19 |
) |
|
Other operating costs and |
|
$ |
17 |
|
|
$ |
16 |
|
|
|
(8 |
) |
|
|
|
(7 |
) |
|
|
$ |
34 |
|
|
$ |
30 |
|
|
|
(13 |
) |
|
|
|
(14 |
) |
|
Corporate G&A expenses |
|
$ |
36 |
|
|
$ |
36 |
|
|
|
2 |
|
|
|
|
2 |
|
|
|
$ |
81 |
|
|
$ |
78 |
|
|
|
(3 |
) |
|
|
|
(3 |
) |
|
Other unallocated income, |
|
$ |
(1 |
) |
|
$ |
— |
|
|
NM |
|
|
|
NM |
|
|
|
$ |
(1 |
) |
|
$ |
(1 |
) |
|
|
(29 |
) |
|
|
|
(29 |
) |
|
||
Interest income, net |
|
$ |
25 |
|
|
$ |
31 |
|
|
|
(21 |
) |
|
|
|
(21 |
) |
|
|
$ |
51 |
|
|
$ |
69 |
|
|
|
(26 |
) |
|
|
|
(26 |
) |
|
Investment (loss) gain |
|
$ |
(18 |
) |
|
$ |
8 |
|
|
NM |
|
|
|
NM |
|
|
|
$ |
(15 |
) |
|
$ |
16 |
|
|
NM |
|
|
|
NM |
|
|
||||
Income tax provision |
|
$ |
(80 |
) |
|
$ |
(77 |
) |
|
|
(4 |
) |
|
|
|
(3 |
) |
|
|
$ |
(199 |
) |
|
$ |
(190 |
) |
|
|
(5 |
) |
|
|
|
(5 |
) |
|
Equity in net earnings |
|
$ |
2 |
|
|
$ |
— |
|
|
NM |
|
|
|
NM |
|
|
|
$ |
6 |
|
|
$ |
— |
|
|
NM |
|
|
|
NM |
|
|
||||
Effective tax rate |
|
|
25.8 |
% |
|
|
25.2 |
% |
|
|
(0.6 |
) |
ppts. |
|
|
(0.6 |
) |
ppts. |
|
|
26.9 |
% |
|
|
26.2 |
% |
|
|
(0.7 |
) |
ppts. |
|
|
(0.7 |
) |
ppts. |
Revenues from Transactions with Franchisees
Revenues from transactions with franchisees primarily include revenues derived from the Company’s central procurement model, whereby food and paper products are centrally purchased and then mainly sold to KFC and Pizza Hut franchisees. The quarter and year to date increase in revenues from transactions with franchisees, excluding the impact of F/X, was mainly due to the increase in system sales for franchisees primarily driven by acceleration of franchise store openings.
Interest Income, Net
The quarter and year to date decrease in interest income, net, excluding the impact of F/X, was primarily driven by lower interest rates and lower investment balance with cash used in return to shareholders.
Investment (Loss) Gain
The investment (loss) gain mainly relates to the change in fair value of our investment in Meituan. See Note 3 for additional information.
Income Tax Provision
Our income tax provision primarily includes tax on our earnings generally at the Chinese statutory tax rate of 25% with certain Chinese subsidiaries qualified for preferential tax rates, withholding tax on planned or actual repatriation of earnings outside of China, Hong Kong profits tax, and U.S. corporate income tax, if any. The higher effective tax rate for the quarter ended June 30, 2025 was primarily due to higher withholding tax associated with higher planned repatriation of earnings outside of China, and the impact from fair value change of our investment in Meituan. The higher effective tax rate for the year to date ended June 30, 2025 was primarily due to higher withholding tax associated with higher planned repatriation of earnings outside of China, less interest income subject to lower income tax rates and the impact from fair value change of our investment in Meituan.
39
Significant Known Events, Trends or Uncertainties Expected to Impact Future Results
Tax Examination on Transfer Pricing
We are subject to reviews, examinations and audits by Chinese tax authorities, the Internal Revenue Service and other tax authorities with respect to income and non-income based taxes. Since 2016, we have been under a national audit on transfer pricing by the STA in China regarding our related party transactions for the period from 2006 to 2015. The information and views currently exchanged with the tax authorities focus on our franchise arrangement with YUM. We continue to provide information requested by the tax authorities to the extent it is available to the Company. It is reasonably possible that there could be significant developments, including expert review and assessment by the STA, within the next 12 months. The ultimate assessment and decision of the STA will depend upon further review of the information provided, as well as ongoing technical and other discussions with the STA and in-charge local tax authorities, and therefore it is not possible to reasonably estimate the potential impact at this time. We will continue to defend our transfer pricing position. However, if the STA prevails in the assessment of additional tax due based on its ruling, the assessed tax, interest and penalties, if any, could have a material adverse impact on our financial position, results of operations and cash flows.
PRC Value-Added Tax (“VAT”)
Effective May 1, 2016, a 6% output VAT replaced the 5% business tax (“BT”) previously applied to certain restaurant sales. Input VAT would be creditable to the aforementioned 6% output VAT. Our new retail business is generally subject to VAT rates at 9% or 13%. The latest VAT rates imposed on our purchase of materials and services included 13%, 9% and 6%, which were gradually changed from 17%, 13%, 11% and 6% since 2017. These rate changes impact our input VAT on all materials and certain services, mainly including construction, transportation and leasing. However, the impact on our operating results was insignificant.
Entities that are general VAT taxpayers are permitted to offset qualified input VAT paid to suppliers against their output VAT upon receipt of appropriate supplier VAT invoices on an entity-by-entity basis. When the output VAT exceeds the input VAT, the difference is remitted to tax authorities, usually on a monthly basis; whereas when the input VAT exceeds the output VAT, the difference is treated as a VAT asset which can be carried forward indefinitely to offset future net VAT payables. VAT related to purchases and sales which have not been settled at the balance sheet date is disclosed separately as an asset and liability, respectively, in the Condensed Consolidated Balance Sheets. At each balance sheet date, the Company reviews the outstanding balance of any VAT asset for recoverability, giving consideration to the indefinite life of VAT assets as well as its forecasted operating results and capital spending, which inherently includes significant assumptions that are subject to change. As of June 30, 2025 and December 31, 2024, the Company has not made an allowance for the recoverability of VAT assets, as the balance is expected to be utilized to offset against VAT payables or be refunded in the future.
On June 7, 2022, the Chinese Ministry of Finance (“MOF”) and the STA jointly issued Circular [2022] No. 21, to extend full VAT credit refunds to more sectors and increase the frequency for accepting taxpayers’ applications. Beginning on July 1, 2022, entities engaged in providing catering services in China are allowed to apply for a lump sum refund of VAT assets accumulated prior to March 31, 2019. In addition, VAT assets accumulated after March 31, 2019 can be refunded on a monthly basis.
As of June 30, 2025, current VAT assets of $120 million, non-current VAT assets of $8 million and net VAT payable of $9 million were recorded in Prepaid expenses and other current assets, Other assets and Accounts payable and other current liabilities, respectively, in the Condensed Consolidated Balance Sheets.
The Company will continue to review the classification of VAT assets at each balance sheet date, giving consideration to different local implementation practices of refunding VAT assets and the outcome of potential administrative reviews.
We have been benefiting from the retail tax structure reform since it was implemented on May 1, 2016. However, the amount of our expected benefit from this VAT regime depends on a number of factors, some of which are outside of our control. The interpretation and application of the new VAT regime are not settled at some local governmental levels. On December 25, 2024, China enacted the prevailing VAT regulations into the VAT Law, which will come into effect on January 1, 2026. In terms of tax rates, the VAT Law maintains the existing rates of 13%, 9% and 6%. We will monitor the regulatory developments and evaluate the impact, if any, once the detailed implementation rules are released.
Foreign Currency Exchange Rate
The reporting currency of the Company is the US$. Most of the revenues, costs, assets and liabilities of the Company are denominated in Chinese Renminbi (“RMB”). Any significant change in the exchange rate between US$ and RMB may materially
40
affect the Company’s business, results of operations, cash flows and financial condition, depending on the weakening or strengthening of RMB against the US$. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for further discussion.
Condensed Consolidated Cash Flows
Our cash flows for the years to date ended June 30, 2025 and 2024 were as follows:
Net cash provided by operating activities was $864 million in 2025 as compared to $843 million in 2024. The increase was primarily driven by the increase in Operating profit along with working capital changes.
Net cash used in investing activities was $290 million in 2025 as compared to $132 million in 2024. The increase was mainly due to the net impact on cash flows resulting from purchases and maturities of short-term investments, and long-term bank deposits and notes, partially offset by the decrease in capital spending.
Net cash used in financing activities was $709 million in 2025 as compared to $785 million in 2024. The decrease was primarily driven by the decrease in share repurchases, partially offset by the lapping impact from the proceeds from short-term bank borrowings received in prior year and repaid in current year and increase of cash dividends paid on common stock.
Liquidity and Capital Resources
Historically we have funded our operations through cash generated from the operation of our Company-owned stores and our franchise operations. Our global offering in September 2020 provided us with $2.2 billion in net proceeds.
Our ability to fund our future operations and capital needs will primarily depend on our ongoing ability to generate cash from operations. We believe our principal uses of cash in the future will be primarily to fund our operations and capital expenditures for accelerating store network expansion and store remodeling, to step up investments in digitalization, automation and logistics infrastructure, to provide returns to our stockholders, as well as to explore opportunities for investments that build and support our ecosystem or strategic acquisitions. We believe that our future cash from operations, together with our funds on hand and access to the capital markets, will provide adequate resources to fund these uses of cash, and that our existing cash, net cash from operations and credit facilities will be sufficient to fund our operations and anticipated capital expenditures for the next 12 months. We currently expect our fiscal year 2025 capital expenditures to be in the range of approximately $600 million to $700 million.
If our cash flows from operations are less than we require, we may need to access the capital markets to obtain financing. Our access to, and the availability of, financing on acceptable terms and conditions in the future or at all will be impacted by many factors, including, but not limited to:
There can be no assurance that we will have access to the capital markets on terms acceptable to us or at all.
Generally, our income is subject to the Chinese statutory tax rate of 25%. However, to the extent our cash flows from operations exceed our China cash requirements, the excess cash may be subject to an additional 10% withholding tax levied by the Chinese tax authority, subject to any reduction or exemption set forth in relevant tax treaties or tax arrangements.
Share Repurchases and Dividends
The Company’s Board of Directors has authorized an aggregate of $4.4 billion for our share repurchase program, including its most recent increase in authorization on November 4, 2024. Yum China may repurchase shares under this program from time to time in the open market or, subject to applicable regulatory requirements, through privately negotiated transactions, block trades, accelerated share repurchase transactions and the use of Rule 10b5-1 trading plans. During the years to date ended June 30, 2025 and 2024, the Company repurchased 7.7 million shares of common stock for $356 million and 21.7 million shares of common stock for $868 million, respectively, under the repurchase program, excluding transaction costs and excise tax.
41
For the quarters ended June 30, 2025 and 2024, the Company paid cash dividends of approximately $90 million and $62 million, respectively, and for the years to date ended June 30, 2025 and 2024, the Company paid aggregate cash dividends of approximately $180 million and $126 million, respectively, to stockholders through a quarterly dividend payment of $0.24 and $0.16 per share, respectively.
The Company plans to return $3 billion to shareholders in 2025 through 2026, adding to the $1.5 billion it delivered to shareholders in 2024. The Company expects the total return of capital for 2025 to be at least $1.2 billion.
On August 5, 2025, the Board of Directors declared a cash dividend of $0.24 per share, payable on September 23, 2025, to stockholders of record as of the close of business on September 2, 2025. The total estimated cash dividend payable is approximately $88 million.
Our plan of capital returns to shareholders is based on current expectations, which may change based on market conditions, capital needs or otherwise. In addition, our ability to declare and pay any dividends on our stock may be restricted by our earnings available for distribution under applicable Chinese laws. The laws, rules and regulations applicable to our Chinese subsidiaries permit payments of dividends only out of their accumulated profits, if any, determined in accordance with applicable Chinese accounting standards and regulations. Under Chinese laws, an enterprise incorporated in China is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. As a result, our Chinese subsidiaries are restricted in their ability to transfer a portion of their net assets to us in the form of dividends. At the discretion of the board of directors, as an enterprise incorporated in China, each of our Chinese subsidiaries may allocate a portion of its after-tax profits based on Chinese accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.
Borrowing Capacity
As of June 30, 2025, the Company had credit facilities of RMB9,666 million (approximately $1,349 million), comprised of onshore credit facilities in the aggregate amount of RMB6,800 million (approximately $949 million), offshore credit facilities in the aggregate amount of $200 million and a credit facility of $200 million that can be used for either onshore or offshore.
The credit facilities had remaining terms ranging from less than one year to three years as of June 30, 2025. Our credit facilities mainly include term loans, overdrafts, letters of credit, banker’s acceptance notes and bank guarantees. The credit facilities in general bear interest based on the Loan Prime Rate (“LPR”) published by the National Interbank Funding Centre of the PRC, or Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York. Each credit facility contains a cross-default provision whereby our failure to make any payment on a principal amount from any credit facility will constitute a default on other credit facilities. Some of the credit facilities contain covenants limiting, among other things, certain additional indebtedness and liens, and certain other transactions specified in the respective agreements. As of June 30, 2025, we had outstanding bank guarantees of RMB268 million (approximately $37 million) mainly to secure our lease payments to landlords for certain Company-owned restaurants. The credit facilities were therefore reduced by the same amount, while there were no bank borrowings outstanding as of June 30, 2025. As of June 30, 2025, the Company had unused credit facilities of approximately $1,312 million.
New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
See Note 2 for details of recently adopted accounting pronouncements.
New Accounting Pronouncements Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures (“ASU 2023-09”), requiring public business entities to provide additional information in the rate reconciliation and additional disclosures about income taxes paid. ASU 2023-09 is effective for the Company's annual disclosure from 2025, with early adoption permitted. We are currently evaluating the impact the adoption of this standard may have on our financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), requiring public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory, employee compensation, depreciation, amortization and depletion expenses for each caption on the income statement where such expenses are included. ASU 2024-03 is effective for the Company for annual period from January 1, 2027, and for interim periods from January 1, 2028, with early adoption permitted. We are currently evaluating the impact the adoption of this standard may have on our financial statements.
42
Cautionary Note Regarding Forward-Looking Statements
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These statements often include words such as “may,” “will,” “estimate,” “intend,” “seek,” “expect,” “project,” “anticipate,” “believe,” “plan,” “could,” “target,” “aim,” “commit,” “predict,” “likely,” “should,” “forecast,” “outlook,” “model,” “continue,” “ongoing” or other similar terminology. Forward-looking statements are based on our expectations, estimates, assumptions or projections concerning future results or events as of the date of the filing of this Form 10-Q. Our plan of capital returns to shareholders is based on current expectations, which may change based on market conditions, capital needs or otherwise. Forward-looking statements are neither predictions nor guarantees of future events, circumstances or performance and are inherently subject to known and unknown risks, uncertainties and assumptions that could cause our actual results and events to differ materially from those indicated by those statements. We cannot assure you that any of our assumptions are correct or any of our expectations, estimates or projections will be achieved. Numerous factors could cause our actual results to differ materially from those expressed or implied by forward-looking statements, including, without limitation, the following:
43
In addition, other risks and uncertainties not presently known to us or that we currently believe to be immaterial could affect the accuracy of any such forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. You should consult our filings with the SEC (including the information set forth under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024) for additional information regarding factors that could affect our financial and other results. You should not place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Form 10-Q. We are not undertaking to update any of these statements, except as required by law.
44
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Exchange Rate Risk
Changes in foreign currency exchange rates impact the translation of our reported foreign currency denominated earnings, cash flows and net investments in foreign operations, virtually all of which are denominated in RMB. While substantially all of our supply purchases are denominated in RMB, from time to time, we enter into agreements with third parties to purchase certain amount of goods and services sourced overseas and make payments in the corresponding local currencies at predetermined exchange rates when practical, to minimize the related foreign currency exposure with immaterial impact on our financial statements.
As substantially all of the Company’s operations are located in China, the Company is exposed to movements in the RMB foreign currency exchange rate. For the quarter and year to date ended June 30, 2025, the Company’s Operating profit would have decreased by approximately $29 million and $67 million, respectively, if the RMB weakened 10% relative to the U.S. dollar. This estimated reduction assumes no changes in sales volumes or local currency sales or input prices.
Commodity Price Risk
We are subject to volatility in food costs as a result of market risk associated with commodity prices. Our ability to recover increased costs through higher pricing is, at times, limited by the competitive environment in which we operate. We manage our exposure to this risk primarily through pricing agreements with our vendors.
Investment Risk
In September 2018, we invested $74 million in 8.4 million of Meituan’s ordinary shares. The Company sold 4.2 million of its ordinary shares of Meituan in the second quarter of 2020 for proceeds of approximately $54 million. Equity investment in Meituan is recorded at fair value, which is measured on a recurring basis and is subject to market price volatility. See Note 3 for further discussion on our investment in Meituan.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on the evaluation, performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (the “CEO”) and the Chief Financial Officer (the “CFO”), the Company’s management, including the CEO and the CFO, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There were no changes with respect to the Company’s internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.
45
PART II – Other Information
Item 1. Legal Proceedings
Information regarding legal proceedings is incorporated by reference from Note 14 to the Company’s Condensed Consolidated Financial Statements set forth in Part I of this report.
Item 1A. Risk Factors
We face a variety of risks that are inherent in our business and our industry, including operational, legal and regulatory risks. Such risks could cause our actual results to differ materially from our forward-looking statements, expectations and historical trends. Except as set below, there have been no material changes from the risk factors disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 27, 2025.
Escalating tensions between the U.S. and China, including the imposition of additional tariffs, could have a material adverse effect on our business, financial condition, and results of operations.
The U.S. has recently imposed several rounds of tariffs on a wide range of goods imported from various countries, including China. China has also enacted additional tariffs on goods imported from the U.S. These ongoing trade measures, combined with any further deterioration in the U.S.-China bilateral relations or the emergence of tensions involving other countries, may adversely affect global economic, political, and social conditions. Heightened geopolitical tensions could reduce levels of trade, investments, technological exchanges, and other economic activities between major economies, resulting in disruptions to global supply chain, fluctuations in aggregate supply and demand, increased costs of our raw materials, and heightened operational complexities for our business.
Moreover, macroeconomic conditions in China may affect consumer discretionary spending. Uncertainties arising from U.S.-China political, business, economic and trade relations could also trigger negative consumer sentiment towards western brands in China, potentially diminishing demand for our products, which would negatively affect our business, financial condition, and results of operations.
Escalating tensions between the U.S. and China also increase the risk of U.S. regulatory actions targeting China-based companies listed in the U.S., including us. Potential regulatory actions may include restrictions or prohibitions on trading or continued listing of securities of China-based issuers. Such measures, in addition to the delisting risks associated with the HFCAA, could limit our access to the U.S. capital markets, reduce investor demand for our common stock, significantly increase the volatility of the price of our common stock, and thereby materially adversely affect our market value and shareholder value.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
As of June 30, 2025, our Board of Directors authorized an aggregate of $4.4 billion for our share repurchase program. The authorization does not have an expiration date.
The following table provides information as of June 30, 2025 with respect to shares of Yum China common stock repurchased on the NYSE and HKEX by the Company during the quarter then ended:
Period |
|
Total Number of |
|
|
Average Price Paid |
|
|
Total Number of Shares |
|
|
Approximate Dollar |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
4/1/25-4/30/25 |
|
|
1,328 |
|
|
$ |
46.12 |
|
|
|
1,328 |
|
|
$ |
1,059 |
|
5/1/25-5/31/25 |
|
|
1,414 |
|
|
$ |
44.06 |
|
|
|
1,414 |
|
|
$ |
997 |
|
6/1/25-6/30/25 |
|
|
1,377 |
|
|
$ |
43.92 |
|
|
|
1,377 |
|
|
$ |
936 |
|
Total |
|
|
4,119 |
|
|
$ |
44.68 |
|
|
|
4,119 |
|
|
$ |
936 |
|
46
Item 5. Other Information
Other than as disclosed above, during the quarter ended June 30, 2025, none of the Company’s officers (as defined in Rule 16a-1(f) under the Exchange Act) or directors
47
Item 6. Exhibits
Exhibit Number |
|
Description of Exhibits |
10.1 |
|
Senior Advisor Service Contract, dated June 19, 2025, by and between Yum China Holdings, Inc. and Peter A. Bassi.* |
|
|
|
31.1 |
|
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
|
|
|
31.2 |
|
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
|
|
|
32.1 |
|
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
|
|
|
32.2 |
|
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
|
|
|
101.INS |
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document * |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document * |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document * |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document * |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document * |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document * |
|
|
|
104 |
|
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document * |
* Filed or furnished herewith.
† Indicates a management contract or compensatory plan.
48
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Yum China Holdings, Inc. |
|
(Registrant) |
Date: |
|
August 11, 2025 |
/s/ Xueling Lu |
|
|
|
Controller and Principal Accounting Officer |
49
FAQ
What were Yum China (YUMC) consolidated revenues and net income in Q2 2025?
How large is Yum China’s restaurant network as of June 30, 2025?
What cash flow and liquidity did Yum China report for the year to date June 30, 2025?
What share repurchase activity and dividend actions were disclosed by YUMC?
Are there any material tax or legal risks noted in the filing?
